NEOCLASSICAL THEORY AND THE OPTIMIZING PEASANT; AN ECONOMETRIC ANALYSIS OF MARKET FAMILY LABOR SUPPLY IN A DEVELOPING COUNTRY

In this paper a neoclassical framework based on competitive assumptions is utilized to describe market labor supply behavior in two-person households in developing countries and is tested on micro data from India. Many characteristics of rural areas developing nations may make the application of the neoclassical labor supply model more appealing than in developed country labor markets. Labor is less heterogeneous, nonpecuniary differences in wage jobs are likely to be fewer, taxation of savings may be ignored, and time worked may be more flexible. As the marginal efficiency role of schooling in agriculture based on labor supply behavior. The empirical results obtained are supportive of the bahavioral implications of the neoclassical-competitive mode. Section 2 briefly reviews the model of landless household labor supply in which the husband and wife are earners. A corresponding model for landholding is formulated and the relevant comparative statistics are derived and compared to those of the landless model. Landless and landholding models in which wives devote all their time to household activities are also briefly considered. Data from a rural household survey from India are used to test the set of predictions pertaining to the market labor supply of males and females in landless and landholding households derived from the models. The results were consistent with the hypothesis that schooling, for both male and female members of landholding households, enhances agricultural production efficiency in India and thus tends to reduce the off-farm labor supply of cultivators, but indicate that geographical immobility is a marked characteristic of rural labor markets, particularly for males in landholding households.