The Labour Allocation Decisions of Farm Households: Defining a theoretical model

Trevor Donnellan and Thia C. Hennessy

No 137021, Working papers from Factor Markets, Centre for European Policy Studies

Abstract: This paper presents a theoretical model for the analysis of decisions regarding farm household labour allocation. The agricultural household model is selected as the most appropriate theoretical framework; a model based on the assumption that households behave to maximise utility, which is a function of consumption and leisure, and is subject to time and budget constraints. The model can be used to describe the role of government subsidies in farm household labour allocation decisions; in particular the impact of decoupled subsidies on labour allocation can be examined. Decoupled subsidies are a labour-free payment and as such represent an increase in labour-free income or wealth. An increase in wealth allows farm households to work less while maintaining consumption. On the other hand, decoupled subsidies represent a decline in the return to farm labour and may lead to a substitution effect, i.e. farmers may choose to substitute non-farm work for farm work. The theoretical framework proposed in this paper allows us to examine these two conflicting effects.

Keywords: Labor; and; Human; Capital (search for similar items in EconPapers)
Pages: 10
Date: 2012-10-23
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:famawp:137021

DOI: 10.22004/ag.econ.137021

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