Contents

Should farmers farm more? Comparing marginal products within Malawian households

Brummund, Peter / Merfeld, Joshua

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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 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.

Issue Date
ACCEPT
Publisher
Wiley-Blackwell
Keywords Plus
Shadow Wages; Labor; Income; Inefficiency; Efficiency; Employment; Gender; Risk
Keywords(Author)
Agriculture; Efficiency; Labor Productivity; Non-farm Production; Risk
DOI
10.1111/agec.12680
Journal Title
Agricultural Economics
ISSN
0169-5150
Language
English
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