Off-farm Labor Market Research Articles

Refugee inflows, surplus farm labor, and crop marketization in rural Africa

This paper sheds light on the structure of factor and output market frictions to investigate long-term effects of refugee inflows on host farmers. Combining a canonical agricultural household model, the natural experimental setting of mass refugee inflows into Tanzania in the early 1990s, and longitudinal panel data from the host economy, I show that refugee inflows cause market-specific gains and losses. Refugee inflows tighten the off-farm labor market participation constraint, implying an increase in surplus farm labor and labor market inefficiency. On the other hand, I observe a positive impact on the transition from subsistence to crop marketization. This transition is revealed to be primarily due to a reduction in fixed transaction costs around refugee camps, not due to an increase in consumption demand by refugees. While the overall impact on agricultural labor productivity is negative, the “surplus farm labor effect” and the “crop marketization effect” act in opposite directions.

Rising labour costs and the future of rubber intercropping in China

ABSTRACT This study identifies the role of labour constraints in the use of rubber intercropping among smallholder farmers in Southwest China, drawing on a panel dataset collected from a sample of over 600 farm households in the Xishuangbanna Dai Autonomous Prefecture (XSBN). The analysis is based on two models: (i) a panel model to analyze the factors responsible for the decline in the use of rubber intercropping among smallholder farmers; (ii) an instrumental variable and endogenous switching model to assess the specific effects of off-farm labour market participation on the use of intercropping. We find a strong effect of the costs of labour on rubber intercropping. The decline in the use of intercropping has a potentially negative impact on environmental sustainability and endangers the government’s environmentally friendly rubber programme. The paper explores possibilities of how farmers can maintain intercropping under increasing labour constraints such as more engagement of elderly and female household members. This may require modifications in intercropping technologies and training. The paper recommends that the government should encourage the continuation of intercropping by a combination of well-balanced measures that include on-farm research, participatory farmer training, payment for environmental services, and effective monitoring.

Gains and losses: Does farmland acquisition harm farmers’ welfare?

Based on data from the China Household Income Project in 2013, this study empirically evaluates the income effect and happiness effect of land acquisition. The results show that land acquisition improves household income but reduces individual happiness. Propensity score matching (PSM) methods have proved the robustness of this result. The mechanism analysis shows that (1) land compensation is not enough to generate “labor supply effect”, whereas land acquisition intensity has a dominant effect which promotes households allocate more labor on off-farm labor market, especially on local off-farm activities. The positive income effect is significant only in the eastern region of China. (2) Both the great deprivation of farmland and compensation inequality have a negative effect on happiness level, but various forms of non-pecuniary compensation have no significant effect on happiness improvement. We conclude that the increase in household income cannot offset the negative effect of land acquisition on happiness, the decrease in happiness levels of land-lost farmers may be largely due to the compensatio system which has not provided fair compensation and not sufficiently taken full account of how to secure their property rights and ensure their long-term livelihood. Finally, we provide recommendations on the reform of the current land acquisition system to improve the interests and welfare of land-lost farmers during the process of urbanization.

Rural-Urban Migration Decisions in China: Evidence from Rural Household Panel Data

This paper analyzes the household's off-farm labor response to risk using the Research Center on the Rural Economy (RCRE) panel data in China. This paper aims to find out whether the off-farm labor market, especially the migrant labor market, could be used as a means of coping with risk and shocks to income by poor households in rural China who have only limited access to the credit and insurance markets for managing risk. Instead of using the endogenous transitory income variance under the short time span of the data, we suggest using relatively exogenous measure of risk, such as the coefficient of variation of rainfall in each village, might be more appropriate to find the effect of risk on household's off-farm labor participation decision. Our results support the idea that households facing a riskier or more volatile distribution of precipitation are more likely to participate in the off-farm labor market. Attention to the potential risk-coping benefits from off-farm employment is timely for Chinese policy makers because both local and national policies accommodating the growth of markets for off-farm migrant labor have come under increasing pressure. As cities face growing problems of unemployed workers from state- owned enterprises, both local and national governments have taken measures to reduce competition for jobs between rural laborers and those urban residents left unemployed during the state-owned enterprises reform period. This paper suggests that rural resident would suffer from urban policies restricting the in-flow of migrants in two ways. Households sending temporary migrants to cities will suffer both a loss of income, and a loss of means of coping with risk. In fact, the analysis of this paper suggests that the welfare of Chinese farm households in rural areas can be further improved by eliminating the remaining institutional obstacles to expansion of migrant employment opportunities.

Diversification of marketing strategies among small farms: empirical evidence from family farms in Taiwan

Farm marketing has been recognized as an important factor for a successful farm business. Due to the increasing interest of consumers in food safety, direct marketing of farm products to consumers in the local farmers’ markets has become very popular. Compared to traditional farm marketing channels, relatively little is known about the use of direct-to-consumer marketing strategies by farmers. This paper aims to provide a more comprehensive picture of farmers’ choices among available farm marketing channels using the case study of Taiwan. Using a population-based survey of 5600 family farms in Taiwan in 2014, in this study we quantify the extent to which demographic characteristics of farm operators, farm production and family conditions may influence the decision of farms to sell farm products to the government, wholesale markets, and in direct-to-consumer sales. We develop a trivariate probit model, and our results indicate that education level and engagement in the off-farm labour market of farm operators, the number of household members, farm size, land ownership, and the type of farm are the key factors in determining farmers’ choice of marketing channels. The findings of this study may have important implications for the design of more effective farm marketing programs by agricultural authorities.

Institutional Regime, Off-Farm Employment, and the Interaction Effect: What are the Determinants of Households’ Forestland Transfer in China?

The development of the land rental market has been widely attributed to the associated institutional regime and the functioning of the off-farm labor market. However, little is known of the interaction effect of these two factors. To fill this gap, we employ a nationwide representative household dataset to investigate the effects of China’s collective forest tenure reform (CFTR) and off-farm employment on forestland transfer in China. Special interest is focused on their potential interaction effect. The Smith-Blundell instrumental variable tobit model is adopted to account for the endogeneity of off-farm employment. The estimation results show that both the tenure reform and off-farm employment significantly influence forestland transactions. However, compared to the positive effect of the reform on both renting in and renting out forestland, the effect of off-farm employment is mixed, that is, its effect is negative when forestland is rented in but positive on rent-out decisions. An important finding is that the CFTR imposes a negative enhancement effect on forestland rent-in through its interaction term with off-farm employment. In contrast, the enhancement effect on rent-out is not statistically significant, which may be due to the neutralization by the endowment effect of the CFTR.

Drivers of cropland abandonment in mountainous areas: A household decision model on farming scale in Southwest China

Cropland abandonment has emerged as a prevalent phenomenon in the mountainous areas of China. While there is a general understanding that this new trend is driven by the rising opportunity cost of rural labor, rigorous theoretical and empirical analyses are largely absent. This paper first develops a theoretical model to investigate household decisions on farming scale when off-farm labor market is accessible and there is heterogeneity of farmland productivity and distribution. The model is capable of explaining the hidden reasons of cropland abandonment in sloping and agriculturally less-favored locations. The model also unveils the impacts of heterogeneity of household labor on fallow decisions and the efficiency loss due to an imperfect labor market. The model is empirically tested by applying the Probit and Logit estimators to a unique household and land-plot survey dataset which contains 5258 plots of 599 rural households in Chongqing, a provincial level municipality, in Southwest China. The survey shows that more than 30% of the sample plots have been abandoned, mainly since 1992. The econometric results are consistent with our theoretical expectations. This work would help policy-makers and stakeholders to identify areas with a high probability of land abandonment and farming practice which is less sustainable in the mountainous areas.

Gender and Off‐farm Employment: Evidence from Rural China

AbstractThe goal of the present paper is to examine how the expansion of the economy from 2000 has affected rural off‐farm labor market participation. Specifically, we seek to determine whether off‐farm labor increased after 2000, what forms of employment are driving trends in off‐farm labor and whether gender differences can be observed in off‐farm employment trends. Using a nationally representative dataset that consist of two waves of surveys conducted in 2000 and 2008 in six provinces, this paper finds that off‐farm labor market participation continued to rise steadily in the early 2000s. However, there is a clear difference in the trends associated with occupational choice before and after 2000. In addition, we find that rural off‐farm employment trends are different for men and women. Our analysis also shows that the rise of wage‐earning employment corresponds with an increasing unskilled wage for both men and women.

It’s not all about the money: understanding farmers’ labor allocation choices

Using a nationally representative survey of farm operators in Ireland, this study examines the effect of non-pecuniary benefits from farm work on labor allocation choices. Results suggest that non-pecuniary benefits affect both the decision to enter the off-farm labor market and also once that decision is made, the amount of time spent working off-farm. We find our derived variable representing non-monetary benefits associated with farm work to have a substantial impact similar to the effect of other more widely reported personal and farm structural variables such as the age of the farm operator, farm size, and farming system. The existence of these non-pecuniary benefits serves to increase the implied wage to farmers for their farm work. This in turn can lead to allocations of labor that would seem suboptimal from a purely financial point of view. Rural development policies aimed at creating off-farm opportunities could fail unless returns to off-farm work are high enough to compensate the farmer for losing the benefits associated with the farming lifestyle. From a methodological perspective, our analysis indicates that failure to model off-farm labor allocation choices as a two-part process may lead to some incorrect conclusions regarding the effect of certain explanatory variables. Outside of explaining farmers’ off-farm labor supply it would be useful to incorporate farmer perceptions regarding the non-pecuniary benefits from farming in economic models of farm behavior across a range of activities as this could lead to much more accurate predictions of farmers’ responses to policy changes.

Impact of the Global Financial Crisis in Rural China: Gender, Off-farm Employment, and Wages

This contribution documents the effect of the global financial crisis on women's off-farm employment in China's rural labor force. It begins by comparing the difference between the actual off-farm employment rate and the off-farm employment rate under the assumption of “business as usual” (BAU – a counterfactual of what off-farm employment would have been in the absence of the crisis). The study also examines how the impact of the financial crisis hit different segments of the rural off-farm labor market. Using a primary dataset, the study found that the global financial crisis affected women workers. By April 2009, there was a 5.3 percentage point difference between off-farm employment under BAU and actual off-farm employment for women, and the monthly wages of women declined. Most of this impact affected migrant wage earners; however, the impact did not fall disproportionately on women. The recovery of women's employment was as fast as that of men's employment.

Guest Editors' Words

For this Special Issue we have endeavored to compile a set of papers that carry a coherent message to the readership of China & World Economy. The work builds upon and seeks to extend two recent topics of debate in China. First, we recognize and add to the literature on tightening labor markets, rising wage rates and the emergence of a new era in China’s economic development. Second, we contribute to the debate on the seriousness of inequality in China. This set of papers has three sub-themes. In the first paper, we draw on a large national representative set of data, which helps to set the scene for the rest of the Special Issue. This paper brings new evidence on China’s rural labor market. It looks at trends over time and documents the simple and clear fact that, at least among the younger cohorts (ages 16 to 40 for men and ages 16 to 30 for women), almost all individuals in China’s labor force have already transitioned from agriculture to the off-farm labor market. Although there are additional members of the labor force that are still engaged in farming, most of these are elderly men and middle-aged women. In the conclusion of the paper, we validate the observations of a number of researchers who believe that wages in China have begun to rise and, assuming labor demand stays strong, that the upward pressure on wages is here to stay. In the other two sub-sections, we begin to examine what this might mean for the future of China. Specifically, we attempt to answer questions about whether the labor force will be capable of meeting the demands of China’s economy two decades from now. To do so, we are implicitly making two assumptions: first, that a large segment of China’s future labor force (e.g. in 2030) are coming from rural areas of central and western China; and, second, that the quality of the labor force tomorrow will depend on the quality of human capital being built today. Our concern is that if children today in many rural areas of China are not

A micro-simulation evaluation of the effectiveness of an Irish grass roots agri-environmental scheme

Agri-environmental schemes designed to induce agricultural producers to provide environmental public goods must increasingly justify exchequer costs. This requires comparing the non-market value of amenity externalities with government expenditures. We employ a preference calibrated micro-simulation model to analyze the economic viability of a grass roots agri-environment scheme in the West of Ireland. We also simulate the land-use response of individual producers to variations in program funding and market conditions. Our results indicate that heterogeneous preferences crucially influence producers’ decisions to provide environmental public goods; producers are highly sensitive to market and policy incentives, in particular to semi-organic product price premia, off-farm labor market conditions, and subsidy payments; and finally, even in the most unfavorable simulated market conditions, support payments provide a rate of return exceeding 71% and in current conditions provide returns as high as 185%.

Serfdom, Emancipation, and Off-farm Labour Mobility in Tsarist Russia

ABSTRACT Serfdom is the most well known institutional feature of Russia under the Tsars, but its empirical implications for growth and development have rarely been explored. This paper investigates whether the legacy of serfdom affected labour mobility in the Russian countryside after Emancipation in 1861. I detail the structure of the reforms that ended serfdom and transferred property to the former serfs, and show that these measures did result in smaller land endowments, higher obligation levels, and possibly stronger communal restrictions than other groups of peasants faced in the post-Emancipation period. Drawing on a unique panel dataset of representative villages in Moscow province, I show how these differences were related to the scope of mobility out of agriculture between former serf and non-serf villages after 1861. Although the results suggest some persistence of constraints on labour mobility among former serfs, the observable differences in off-farm labour market activity largely disappear by 1900, despite persistent differences in land endowments between former serfs and non-serf peasants.

Off-farm labor supply and labor markets in rapidly changing circumstances: Bulgaria during transition

This study examines off-farm labor supply in the rapidly changing conditions of Bulgaria during the 1990s. In doing so, we make use of three different waves of the Bulgarian Integrated Household Survey, each reflecting remarkably different environmental conditions. The results suggest that standard theories of off-farm labor supply provide little guidance in situations characterized by chronic excess supply in the off-farm labor market and/or rapidly changing circumstances. In particular, the results show (1) that off-farm employment throughout the transition was predominantly determined by demand rather than by supply, and (2) that the magnitude and statistical significance of the various determinants are very sensitive to changing environmental conditions. As such, the results can be extremely relevant for both theory and policy for the many countries which may still need to go through privatization and painful restructuring as a result of financial crises and globalization.

Interrelated labor decisions of farm couples: a censored response analysis of off‐farm work

AbstractFarm couples' labor market responses are partly the discrete choice of entering the off‐farm labor market and partly the continuous choice of off‐farm working hours, given entry. Such a setting is interesting when examining the increasing occurrence of multiple job‐holdings among farmers in Western economies. Most existing analyses of off‐farm labor supply only model the decisions of the farmer, not the joint decisions of the farm couple. This article presents a framework for handling such interrelated discrete/continuous choices, involving also farm production and household consumption. The derived two‐equation sub‐model for husband/wife's censored labor responses is estimated from a 10‐year Norwegian panel data for 342 farms. The results agree to some extent with earlier studies, but are more informative because of the longer panels—which allows a more extensive examination of latent heterogeneity and behavioral persistence—because it provides cross‐effects in the spouses' labor supplies. The results show some interesting differences between how the independent variables influence the labor supply of operator and spouse. This is most evident for the cross‐effects of education, children, and wage rate. Overall, the results strongly support applying a panel‐censoring model that accounts for latent heterogeneity in this context.

Peasant communes and factor markets in late nineteenth-century Russia

The peasant land commune was the emblematic institutional feature of agrarian Russian society before the Revolution of 1917. Economic historians have long blamed the commune for restricting household behavior in ways that contributed to Russia's economic “backwardness” by the late 19th century. Drawing on new household-level data collected from archival sources in Moscow province, this article provides the first microeconomic analysis of local factor markets and household behavior within the institutional context of the Russian peasant commune. The empirical evidence indicates that peasant households did have substantial flexibility when it came to allocating their land and labor holdings. In response to mortality shocks or lags in the communal adjustment of land, households engaged in land rentals and off-farm labor market transactions to improve upon suboptimal factor endowments. Although these findings do not imply that the resulting allocation of resources was fully efficient, they do illustrate how peasants made rational factor market transactions in a seemingly inhospitable institutional environment.

The Effects of Metropolitan Residence on the Off-Farm Earnings of Farm Families in the United States1

Previous research on the effects of urbanization on farming and farm families has focused on the consequences of urban expansion on farming practice rather than on the well-being of farm families. Proximity to urban areas has been found to alter the way farm families utilize the nonfarm labor market. In this study, the off-farm earnings of husbands and wives in farm families are compared across metropolitan (metro) and nonmetropolitan (nonmetro) areas using data from the March supplement to the 1989 Current Population Survey. Censored regression models (tobit) and decomposition are used to demonstrate the effects of nonfarm labor market differences on off-farm labor force participation and earnings. The analysis reveals that farm family members, as expected, have significantly higher rates of participation and earnings in metropolitan areas. But this analysis also reveals that increases in off-farm participation are likely to have a larger effect on total off-farm earnings in nonmetropolitan areas than returns to those already working off-farm. The potential for increases in off-farm earnings will be underestimated in nonmetro areas when changes in participation in the off-farm labor market are not taken into account.

Simultaneous estimation of work choices and the level of farm activity using panel data

We analyse the simultaneous determination and evolution over time of work choices and the level of farm activity, using a panel of Israeli farm households. We estimate jointly a multinomial choice model of work activity and an endogenous switching regression of farm size, accounting for unobserved heterogeneity and correcting for simultaneity bias. Our results imply that some family farms tend to expand over time and specialise in farming, whereas other farm households downsize their farming operation and increase their engagement in the off-farm labour market. Therefore, the size distribution of farms is converging towards a bimodal distribution. Copyright 2006, Oxford University Press.

The potential of land rental markets in the process of economic development: Evidence from China

We develop a model of land leasing with agents characterized by unobserved heterogeneity in ability and presence of an off-farm labor market. In this case, decentralized land rental may contribute to equity and efficiency goals and may have several advantages over administrative reallocation. The extent to which this is true empirically is explored using data from three of China's poorest provinces. Land rental markets and administrative reallocation reallocate land to those with lower endowments but the former are more effective in doing so and have a bigger productivity-enhancing effect. Information on hypothetical market participation suggests that reducing transaction costs in land rental markets could help to realize significant additional productivity gains.

Links among Farm Productivity, Off-Farm Work, and Farm Size in the Southeast

This paper examines the linkages among agricultural total factor productivity, farm size, and farm household participation in the off-farm labor market for the Southeastern states for the period 1960-1996. We find evidence of a simultaneous relationship between productivity and measures of farm structure. The results support the expected relationships between the endogenous variables, namely that productivity and farm size are positively related, farm size and off-farm work participation are negatively related, and off-farm work and productivity are negatively related. We find positive and significant impacts of government policies (investments in public research, extension, and highways) on productivity growth.