variable probability of realignment in a target zone the target zone model presented here encompasses a realignment probability that increases as the fundamental deviates from the center of the zone the analysis is carried out for cases where the fundamental follows either a brownian motion or an ornstein uhlenbeck process the simplest version of the model yields tractable results which prove to be robust when its most restrictive assumption is relaxed the solution obtained is dubbed the steeper s in accordance with its most relevant feature copyright 1994 by the editors of the scandinavian journal of economics

estimating labor supply of farm households under nonseparability empirical evidence from nepal abstract this paper examines the labor supply of farm households in nepal using a recently developed methodology that accounts for the simultaneity between production and consumption decisions of the households estimates of marginal products of male and female labor or shadow wages are obtained from an agricultural production function an instrumental variable approach is then used to recover the household s structural labor supply from variations in the shadow wages and income as well as other household characteristics the findings reveal that both male and female total labor supply are sensitive to changes in shadow wages and income human capital embodied in education is found to exert a significant positive effect on output but has no statistically significant impact on total labor supply of individuals the results also rejects the existence of efficient labor markets in rural nepal

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

estimating labor supply and production decisions of self employed farm producers abstract this paper proposes a model oriented towards integrating farm households production and consumption decisions into a unified theoretical and econometric framework it is argued that in contrast with other forms of economic organization farm households utility and profit maximization decisions are not likely to be independent econometric estimation of a farm household model using canadian data suggests that utility and profit maximizing decisions are not indeed independent and moreover that there are significant gains in explanatory power and efficiency by estimating the consumption and production equations jointly

separation hypothesis tests in the agricultural household model in an agricultural household model farmers production decisions can be either separated or nonseparated from preferences since previous studies on agricultural household behavior and policy effects have shown that the model with separation yields different results than the model with nonseparation it is important to have a test to identify the correct model this paper provides new tests that extend current tests in two directions first the new tests avoid issues that current tests have to address such as simultaneity bias and the estimation of the production function second the new tests make use of more information implied from the separation hypothesis than current tests

an interpretation of recent research on exchange rate target zones how do exchange rate bands work compared to completely fixed rates between realignments or more precisely what are the dynamics of exchange rates interest rates and central bank interventions within exchange rate bands does the difference between bands and completely fixed exchange rates matter and if so which of the two arrangements is best or more precisely what are the tradeoffs that determine the optimal bandwidth this article will present an interpretation of some selected recent theoretical and empirical research on exchange rate target zones with emphasis on main ideas and results and without technical detail

asymmetric non separation and rural labor markets abstract this paper develops and implements a test that provides insight into the state of rural labor markets the test is based on a theoretical link between a shortage or surplus in the labor market and asymmetric responses to changes in household composition we develop auxiliary tests to distinguish other market imperfections from labor market imperfections and provide evidence that most changes in household composition are exogenous to local labor market conditions we implement the test using data from ethiopia malawi tanzania and uganda the overall pattern is one of excess labor supply in rural areas with heterogeneity across cultivation phases genders and agro ecological zones surplus labor is most evident during low intensity cultivation phases in ethiopia there is suggestive evidence that credit constraints create a de facto labor shortage for poorer households there is also evidence of partial gender segmentation in rural labor markets

access to capital and agrarian production organisation there are two problems both universal that entrepreneurs in any economy must contend with firstly an agent generally has access only to a limited amount of working capital secondly workers hired by an agent are subject to moral hazard and this necessitates their supervision this paper models for an agrarian economy the constraints imposed on entrepreneurs activities by these two problems and endogenously determines the various organisational forms of production as well as the allocation of resources that will obtain with a simple model we endeavour to explain a diverse set of empirical observations pertaining to the less developed countries in terms of the general processes that determine the distribution of income among the various agents and the hierarchical relationships that develop among them agricultural production typically involves a period of several months between the time the inputs are purchased and the time the output is marketed access to working capital and hence to the credit market thus plays an important role in a farmer s production decisions the distribution of access to credit in turn tends to be an important determinant of income distribution in poor agrarian economies credit is invariably rationed according to the ability to offer collateral the amount of working capital a farmer can mobilise therefore depends on the amount of land he owns which is often a good proxy for his overall wealth and thus his ability to offer collateral further since hired hands have a propensity to shirk they need to be supervised and therefore the

agricultural factor markets in sub saharan africa an updated view with formal tests for market failure this paper uses the recently collected living standard measurement study integrated surveys on agriculture initiative data sets from five countries in sub saharan africa to provide a comprehensive overview of land and labor market participation by agrarian households and to formally test for failures in factor markets under complete and competitive markets households can solve their consumption and production problems separately so that household factor endowments do not predict input demand this paper implements a simple theoretically grounded test of this separation hypothesis which can be interpreted as a reduced form test of factor market failure in all five study countries the analysis finds strong evidence of factor market failure moreover those failures appear general and structural not specific to subpopulations defined by gender or geography

using shadow wages to estimate labor supply of agricultural households with few exceptions most studies of the labor demand and supply decisions of agricultural households in developing countries have relied on the empirical advantages of separability given the questionable nature of some of the assumptions sufficient for separability i apply a recent methodology that accounts for the simultaneity between the production and consumption decisions of a farm household using data from rural india direct estimates of the marginal productivities shadow wages of family male and female labor are derived from a cobb douglas agricultural production function the estimated shadow wages and income are then used as regressors in a structural model of labor supply

shadow wages and shadow income in farmers labor supply functions this article extends the current literature on estimating the labor supply function in agriculture by providing a different method to derive the shadow wage and shadow income the method is based on the observation that the shadow wage is the marginal product of labor at the optimal point of both farm and household production functions thus under certain assumptions on the functional form of the production functions both the shadow wage and shadow income can be derived without estimating the production function using a sample of vietnamese farmers the results from the new method are shown to be consistent with the theory

target zones and realignments recent contributions emphasize that the presence of exchange rate target zones has important effects on the within band behavior of exchange rates when agents are forward looking the authors find that the implications of available models are inconsistent with european exchange rate data and they suggest that the frequent realignments occurring in the period they consider may be responsible for this they construct a model in which the likelihood of a realignment in the near future increases as the exchange rate approaches the limits of its fluctuation band and show that its implications are broadly consistent with the evidence copyright 1992 by american economic association

household composition labor markets and labor demand testing for separation in agricultural household models this paper tests the separation of farm labor supply and labor demand decisions using the observation that household composition is an important determinant of farm labor use with nonseparation after assessing the conditions under which the test has power against several alternatives an empirical model is developed to test the proposition that farm employment is independent of family composition the model is estimated on a data set from rural java the null hypothesis that farm labor allocation decisions are independent of household structure is not rejected the results are robust to different specifications of the labor demand function copyright 1992 by the econometric society

effects of the internal wage on output supply a structural estimation for japanese rice farmers farmers are offered a higher wage rate by their off farm employers than the rate of remuneration they receive for their labor on their own family farms in japan however it is not possible for them to work for as many hours as they want for their off farm employers at the offered wage rate hence they perceive that they face an imperfectly competitive market for labor with only limited opportunities for wage employment see for example arayama 1986 kang and maruyama 1992 markets for their output and factors of production are observed to be perfectly competitive thus the state of the markets they face proves to be similar to the one producer consumer households face in the circumstances addressed in section 2 2 of the preceding chapter since the market for labor is not a perfectly competitive one because it offers only limited opportunities for wage employment the market wage rate ceases to be relevant in organizing their family farms and in making their choice over their level of consumption they are obliged to form an internal wage rate on their own for these purposes within their households the analytical results in section 2 2 show that the internal wage rate proves to be lower than the market rate and renders their supply of output and their demand for factors of production less elastic than in the instance in which all relevant markets are perfectly competitive in extreme cases it gives rise to a downward sloping supply function of output and upward sloping demand functions for the factors of production

stochastic devaluation risk and the empirical fit of target zone models in the model of this paper an exchange rate fluctuates between given boundaries for random lengths of time and jumps discretely when devaluation occur we provide explicit solutions for the stochastic processes followed by the exchange rate and by the expected rate of depreciation when the likelihood and the size of devaluations vary stochastically over time the model produces realistic patterns of covariation between exchange rates and interest rate differentials and provides interesting interpretations of available empirical evidence we also specify how to infer devaluation risk from target zone data

smallholder participation in vegetable exports and age disaggregated labor allocation in northern tanzania modern agricultural supply chains have been playing an increasingly important role in developing countries and have had significant effects on rural labor markets this article analyses the effects of smallholder farmer participation in export vegetable supply chains in northern tanzania on both household hired labor demand and off farm labor supply using an age disaggregated approach in our sample neither separability nor exogeneity of smallholder farmer participation in export supply chains can be rejected hence we apply lognormal double hurdle models and find that participation in export supply chains positively affects households decision to hire labor from all age groups we also find that it increases the unconditional overall level of hired labor demand while the age disaggregated analysis shows that these effects mostly benefit rural youth however our sample does not allow us to establish statistically significant evidence of an effect on household off farm labor supply although the point estimates point to nonnegligible positive effect sizes

land consolidation as technical change economic impacts in rural vietnam abstract this paper deepens the economic analysis of the effects of land consolidation reduction of land fragmentation it does this in the context of rural vietnam studying whether land consolidation promotes or hinders the vietnamese government s policy objectives of encouraging agricultural mechanization and stimulating the off farm rural economy the analysis views land consolidation as a form of technical change making it possible to apply the rich insights developed in the economic literature on that subject this treatment reveals that the economic impacts of land consolidation depend partly on its factor bias and partly on the degree to which labor is substitutable in production for other factors at a theoretical level if a technical change is factor neutral it will reduce off farm labor supply and slow rural structural transformation away from agriculture if it is labor augmenting and the elasticity of substitution between factors is low enough the opposite effects are predicted the paper studies these issues empirically for rice production in vietnam focusing on the impact that consolidation of rice land has on rice production machinery use and labor allocation the findings confirm that land consolidation raises both farm productivity and farm income and stimulates increased machinery use it also reduces farm labor supply lowers labor intensity in farming and thereby releases more farm labor to off farm development consistent with government policy objectives based on these findings the paper concludes that land consolidation should be encouraged through development of land ownership rights and the promotion of land rental markets

moving toward markets labor allocation in rural china abstract china s economic reforms have brought rapid growth in rural off farm employment raising questions about the assumption that rural china is labor surplus and has poorly functioning factor markets we investigate this by testing for separability between household labor demand and supply using panel data we find that separability is rejected overall indicating that factor markets remain underdeveloped nonseparability however is associated with labor surplus in some areas and labor shortage in others moreover separability holds where substantial employment opportunities exist in the wider township suggesting that such employment promotes competitive allocation within villages as well as the inter village movement of resources

rice prices and income distribution in thailand a non parametric analysis rice is a staple crop in thailand significantly entering both household production and consumption this paper examines the effect of rice prices on the distribution of real income across households taking into account household characteristics and geographical location the data set is a large scale survey of 11 893 households simple nonparametric techniques for regression and density estimation are used these methods depend on few assumptions and generate flexible graphical results that are directly informative about the problem at hand the main results are that higher rice prices should benefit all rural households but the largest benefits accrue to rural households in the middle of the income distribution copyright 1989 by royal economic society

target zones for exchange rates and policy changes abstract we extend a target zone model to allow for occasional changes in the stochastic process driving fundamentals a key implication is that seeming speculative attacks may be triggered by market perceptions that macroeconomic policy has switched say from tight to loose this fundamental based explanation for large exchange rate changes accompanied by no discernible contemporaneous change in the fundamental is an alternative to theories based on self fulfilling expectations without relying on intra marginal intervention this model is better able to reproduce empirical exchange rate distributions with more mass at the center and less at the edges of the band

shadow wages and peasant family labour supply an econometric application to the peruvian sierra a striking feature of developing economies is the large proportion of the work force that is self employed lack of widespread labor market participation in the agricultural sector can pose a major obstacle to the empirical implementation of economic models of the peasant household whether because wage data are simply not available or because the assumptions required to make use of wage data stretch the bounds of credulity this paper develops a methodology for estimating a structural labor supply model for primarily self employed peasant households which holds under a general agricultural technology and set of labor market conditions the unique feature of the approach is that the opportunity cost of time or shadow wage of household workers is explicitly estimated from an agricultural production function and is subsequently used to identify a set of structural labor supply parameters recent household survey data from rural peru is employed to estimate and perform various diagnostic tests on the model the empirical findings lend support to the hypothesis that peasant households allocate their members time as if to maximize a family utility function and moreover demonstrate the tractability of the shadow wage methodology and its usefulness in estimating more elaborate time allocation models

market imperfections and output loss in the presence of expenditure constraint a generalized shadow price approach in view of widespread capital market imperfections and farmers budget constraints in developing countries an indirect production function ipf is used for a study of 289 indian paddy growers the analysis generalizes the ipf to accommodate the numerous kinds of market imperfections and policy induced distortions that pervade less developed countries agriculture the presence of these distortions in an expenditure constrained situation results in a loss of output defined as the difference between maximal potential output and actual output for the sample of farmers average output loss is found to be in the range of 12

shadow wages allocative inefficiency and labor supply in smallholder agriculture this article introduces a method for estimating structural labor supply models in the presence of unobservable wages and deviations of households marginal revenue product of self employed labor from their shadow wage this method is therefore robust to a wide range of assumptions about labor allocation decisions in the presence of uncertainty market frictions locational preferences etc we illustrate the method using data from rice producers in cote d ivoire these data like previous studies reveal significant systematic differences between shadow wages and the marginal revenue product of family farm labor we demonstrate how one can exploit systematic deviations in the present case related to household characteristics such as the land labor endowment ratio to control for both unobservable wages and prospective allocative inefficiency in labor allocation in structural household labor supply estimation

trade union membership and earnings in kenyan manufacturing firms this study analyses the effect of trade unions on male earnings in the kenyan manufacturing sector using a regression method which takes into account endogeneity of the union status of workers in contrast to earlier studies of the kenyan labour market that report a negative effect of unions on wages a positive effect is found the study further shows that elite workers tend to abstain from union membership