Should Farmers Farm More? Comparing Marginal Products within Malawian Households

Peter Brummund and Joshua D. Merfeld ()
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Joshua D. Merfeld: KDI School of Public Policy and Management

No 14703, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: According to standard economic theory, households should equate the marginal revenue product of an input across activities within the household. However, this prediction may not hold in the presence of risk. Using data on farm plots and non-farm enterprises in Malawi, we examine the impact of risk on the allocation decisions of agricultural households as they allocate labor across farm and non-farm production. We control for many household and production characteristics, including household fixed effects, and find farm marginal revenue product of labor (MRPL) to be consistently higher than non-farm MRPL. These results hold when restricting estimation to periods of high and low non-farm labor allocation. These results are consistent with farm production being riskier than non-farm production for most households in Malawi. These findings suggest that improved access to insurance of farming activities and wage employment opportunities could increase total household income.

Keywords: non-farm production; agriculture; labor productivity; risk; efficiency (search for similar items in EconPapers)
JEL-codes: J24 J43 O13 Q12 R23 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2021-08
New Economics Papers: this item is included in nep-agr, nep-dev, nep-isf and nep-lma
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Citations: View citations in EconPapers (1)

Published - published in: Agricultural Economics, 2022, 53 (2), 289 - 306

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Journal Article: Should farmers farm more? Comparing marginal products within Malawian households (2022)
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