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The Labour Allocation Decisions of Farm Households: Defining a theoretical model

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  • Donnellan, Trevor
  • Hennessy, Thia C.

Abstract

This paper presents a theoretical model for the analysis of decisions regarding farm household labour allocation. The agricultural household model is selected as the most appropriate theoretical framework; a model based on the assumption that households behave to maximise utility, which is a function of consumption and leisure, and is subject to time and budget constraints. The model can be used to describe the role of government subsidies in farm household labour allocation decisions; in particular the impact of decoupled subsidies on labour allocation can be examined. Decoupled subsidies are a labour-free payment and as such represent an increase in labour-free income or wealth. An increase in wealth allows farm households to work less while maintaining consumption. On the other hand, decoupled subsidies represent a decline in the return to farm labour and may lead to a substitution effect, i.e. farmers may choose to substitute non-farm work for farm work. The theoretical framework proposed in this paper allows us to examine these two conflicting effects.

Suggested Citation

  • Donnellan, Trevor & Hennessy, Thia C., 2012. "The Labour Allocation Decisions of Farm Households: Defining a theoretical model," Working papers 137021, Factor Markets, Centre for European Policy Studies.
    • Handle: RePEc:ags:famawp:137021
    DOI: 10.22004/ag.econ.137021
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    File URL: https://ageconsearch.umn.edu/record/137021/files/FM%20No%2031%20Household%20Labour%20Allocation%20Decisions.pdf
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    Cited by:

    1. Loughrey, Jason & Hennessy, Thia & Hanrahan, Kevin & Donnellan, Trevor & Raimondi, Valentina & Olper, Alessandro, 2013. "Determinants of Farm Labour Use: A Comparison between Ireland and Italy," Working papers 157119, Factor Markets, Centre for European Policy Studies.
    2. Tocco, Barbara & Davidova, Sophia & Bailey, Alastair, 2013. "The Impact of CAP Payments on the Exodus of Labour from Agriculture in Selected EU Member States," Factor Markets Working Papers 180, Centre for European Policy Studies.
    3. S Subramanian, 2018. "Participation of rural households in farm, non-farm and pluri-activity: Evidences from India," Working Papers 412, Institute for Social and Economic Change, Bangalore.
    4. Loughrey, Jason & Hennessy, Thia, 2016. "The Common Agricultural Policy and Farmers’ Off-farm Labour Supply," 160th Seminar, December 1-2, 2016, Warsaw, Poland 249796, European Association of Agricultural Economists.

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