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Place-based rural development programs and the labor allocation of farm households

Author

Listed:
  • Jhih-Yun Liu
  • Brian Lee
  • Hung-Hao Chang

Abstract

Purpose - Rural development programs are widely used policy instruments mitigating rural-urban economic disparities. Yet, little research has examined their effect on rural labor. This study fills this knowledge gap by quantifying the causal impact of such programs on the labor allocation of farm households in Taiwan. Design/methodology/approach - A theoretical framework based on the agricultural household model is constructed to guide the empirical specification. A unique dataset compiles administrative data on the program’s subsidies with farm household surveys across seven years. To cope with endogeneity bias, an instrumental variables model is applied. The eligibility rule for a township to participate in the program is used as the instrument. Findings - We find that the program increases the labor supply of farm household members. These effects are more pronounced for off-farm work, particularly non-heads of farm households. The program’s subsidies supporting culture and promotion-related activities have larger effects. Finally, females benefited more from the program. Originality/value - We focus on farm households since this group is the target of place-based rural development programs. In addition, we identify the causal impact of place-based development programs on rural labor. Finally, this study is relevant to the literature on intra-household models by demonstrating that place-based rural development programs can affect the labor supply of farm household members.

Suggested Citation

  • Jhih-Yun Liu & Brian Lee & Hung-Hao Chang, 2024. "Place-based rural development programs and the labor allocation of farm households," China Agricultural Economic Review, Emerald Group Publishing Limited, vol. 16(4), pages 683-711, May.
  • Handle: RePEc:eme:caerpp:caer-10-2023-0279
    DOI: 10.1108/CAER-10-2023-0279
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