Off-Farm Work Decisions of Farm Couples: Estimating Structural Simultaneous Equations with Ordered Categorical Dependent Variables

Ayal Kimhi and Myoung-jae Lee

American Journal of Agricultural Economics, 1996, vol. 78, issue 3, 687-698

Abstract: We estimate a full system of structural farm and off-farm labor supply equations of farm couples as a set of simultaneous equations with categorical dependent variables. In a first step, the reduced form is estimated by ordered probit with unknown thresholds. Then, the identified structural coefficients are recovered from the reduced-form coefficients through minimum distance estimation. Using census data from Israel, we find that for men, a one-hour increase in farm labor supply causes a one-hour decrease in off-farm labor supply, but not for women. This could not have been found without estimating structural coefficients. Copyright 1996, Oxford University Press.

Date: 1996
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