Seasonal rural labor markets and their relevance to policy analyses in developing countries

Arndt Feuerbacher, Scott McDonald, Chencho Dukpa and Harald Grethe

Food Policy, 2020, vol. 93, issue C

Abstract: Seasonality is a salient feature of rural livelihoods and particularly within agriculture the demand for labor varies with the seasons and weather. In low-income countries, agriculture employs almost two-thirds of the labor force and incomes from labor are a major determinant of welfare. Therefore, an appropriate model representation of rural labor markets is critical when analyzing agricultural and food policies. Economy-wide models are commonly used for ex-ante policy analysis, but have so far ignored the influence of seasonality, implicitly assuming separability of seasonal labor demand and supply. This study relaxes that assumption using a computable general equilibrium (CGE) model calibrated to the Bhutanese economy as an illustrative case. Using model setups with and without seasonal labor markets, a cereal export ban of India is simulated leading to higher import prices for Bhutan. Results demonstrate that neglecting the influence of seasons on rural labor markets systematically biases model results. Assuming homogeneity of labor units, i.e., allowing substitution across seasons, understates the impacts of policy changes on rural wage rates, distorts households' labor-leisure trade-off decisions and overstates agricultural supply response. Given the widespread use of economy-wide models, the results are important for understanding the implications of domestic and global policy changes for agriculture and welfare in developing economies.

Keywords: Rural livelihoods; Seasonal labor; Rural labor markets; Economy-wide modeling; Policy analysis; Bhutan (search for similar items in EconPapers)
JEL-codes: C68 J22 J43 O13 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfpoli:v:93:y:2020:i:c:s0306919220300774

DOI: 10.1016/j.foodpol.2020.101875

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