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|Title:||Farm Household Decision-Making: Theory and Evidence from a Rural Economy|
|Authors:||Khandker, Rahman Shahidur|
|Department:||Economics / Economic Policy|
|Abstract:||<p>Policy interventions into the rural sectors of developing countries are urgently needed in order to alleviate poverty and foster economic growth. The applicability of a farm household model that combines the farm household's production and consumption decisions to the evaluation of policy measures has been explored in this study. A model incorporating the farm household's decisions regarding resource allocation, family size, schooling and participation in income earning activities is developed and its predictions are tested with farm household data from Bangladesh.</p> <p>The data analysis reveals that in rural Bangladesh there exist close relationships between farm size, family size, child schooling and income. The size of the family labour force, which is determined by family size and child schooling rates, appears to be an important determinant of farm household participation in income earning activities. Farm households are found to maximize profit, to respond to price incentives and to be allocatively efficient, given the technology and resources available. On the consumption side, a linear expenditure system that contains a set of household demand functions for goods, including household produced goods, family size and child schooling, and labour supply functions has been estimated. Household response elasticities with respect to some selected variables are calculated first on the assumption that consumption is independent of production decisions. The results show that the household's demand for farm goods is income inelastic while demand for non-farm goods is income elastic. It also suggests that the demand for child quantity and child quality are income inelastic but that a trade-off exists between quantity and quality of minor children.</p> <p>To the extent that the farm household's consumption decisions depend on production decisions, an analysis of the interaction between production and consumption behaviour is undertaken. The major finding of this analysis is that farm households are responsive to prices, income and technical change, both in production and consumption. Any change that may occur in production, following exogeneous changes through some policy variables, also affects household consumption behaviour. This suggests that a model of farm household decision-making that incorporates the interaction of production and consumption behaviour can be of particular importance for policy evaluation.</p>|
|Appears in Collections:||Open Access Dissertations and Theses|
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