USING SHADOW WAGES TO ESTIMATE LABOR SUPPLY OF AGRICULTURAL HOUSEHOLDS

With few exceptions, most studies of the labor demand and supply decis ions of agricultural households in developing countries have relied on the empirical advantages of separability. Given the questionable natu re of some of the assumptions sufficient for separability, I apply a r ecent methodology that accounts for the simultaneity between the produ ction and consumption decisions of a farm household. Using data from r ural India, direct estimates of the marginal productivities (shadow wa ges) of family male and female labor are derived from a Cobb-Douglas a gricultural production function. The estimated shadow wages and income are then used as regressors in a structural model of labor supply.