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Smallholders, Market Failures, and Agricultural Production: Evidence from India

Merfeld, Joshua

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Abstract

Market completeness has important implications for household behavior. I firmly reject complete markets for smallholders but am unable to do so for non-smallholders. This leads to important differences in production behavior: smallholders reallocate labor across activities less in response to intra-seasonal crop price changes than do non-smallholders. A counterfactual exercise indicates smallholders could increase revenue by almost nine percent if they were to reallocate labor similarly to non-smallholders. The overall pattern of results is consistent with small-holders lacking sufficient wage employment opportunities. Since non-smallholders have to hire in for agricultural production, this lack of opportunities does not affect their decisions.

Issue Date
2020-09
Publisher
IZA – Institute of Labor Economics
Keywords
Markets; Market Failures; Agriculture; Labor
Pages
50
Series Title
IZA DP No. 13682
URI
https://archives.kdischool.ac.kr/handle/11125/42418
URL
https://www.iza.org/publications/dp/13682/smallholders-market-failures-and-agricultural-production-evidence-from-india
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