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Defining an Institutional Framework for the Labour Market

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  • Donnellan, Trevor
  • Hanrahan, Kevin F.
  • Hennessy, Thia C.

Abstract

This paper describes a conceptual framework for the empirical analysis of farmers’ labour allocation decisions. The paper presents a brief overview of previous farm household labour allocation studies. Following this, the agricultural household model, developed by Singh, Squire and Strauss (1986), which has been frequently applied to the study of labour allocation, is described in more depth. The agricultural household model, the theoretical model to be used in this analysis, is based on the premise that farmers behave to maximise utility, which is a function of consumption and leisure. It follows that consumption is bound by a budget constraint and leisure by a time constraint. The theoretical model can then be used to explain how farmers decide to allocate their time between leisure, farm work and off-farm work within the constraints of a finite time endowment and a budget constraint. Work, both farm and off-farm, provides a return to labour which in turn relaxes the budget constraint allowing the farm household to consume more. The theoretical model can also be used to explore the impact on government policies on labour allocation. It follows that subsidies that decrease commodity prices, such as reductions in intervention prices, mean that farmers have to work more (either on or off the farm) to maintain income and consumption levels. On the other hand, income support subsidies that are not linked to output or labour, such as decoupled subsidies, are a source of non-labour income and as such allow farmers to work less while maintaining consumption levels, known as the wealth effect.

Suggested Citation

  • Donnellan, Trevor & Hanrahan, Kevin F. & Hennessy, Thia C., 2012. "Defining an Institutional Framework for the Labour Market," Working papers 123280, Factor Markets, Centre for European Policy Studies.
    • Handle: RePEc:ags:famawp:123280
    DOI: 10.22004/ag.econ.123280
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    File URL: https://ageconsearch.umn.edu/record/123280/files/FM_WP24%20Defining%20an%20Institutional%20Framework%20for%20the%20Labour%20Market%20_D9.1_-1.pdf
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    References listed on IDEAS

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    1. Hartwig De Haen & Joachim Von Braun, 1977. "Mobility of agricultural labour and fluctuating regional labour markets: A demographic and economic analysis with application to West-Germany," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 4(3), pages 215-243.
    2. Topel, Robert, 1999. "Labor markets and economic growth," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 44, pages 2943-2984, Elsevier.
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    Cited by:

    1. Ledwaba, P.F. & Mutemeri, N., 2018. "Institutional gaps and challenges in artisanal and small-scale mining in South Africa," Resources Policy, Elsevier, vol. 56(C), pages 141-148.

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    Keywords

    Labor and Human Capital;

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