Crop Choices and Employment Uncertainty

This book examines the link between agricultural§production decisions, particularly ex ante crop§choice decisions, and off-farm labor income§opportunities available to the cultivator households§in a developing country. The cultivator households§often use off-farm labor supply as an insurance§against shocks in crop income. Yet employment is§uncertain in the off-farm labor market. This book§hypothesizes that, given limited opportunities for ex§post consumption smoothing, employment uncertainty in§the labor market influences risk averse farmers ex§ante crop choice decisions and farmers would opt for§more conservative crop choices in case they expect§unfavorable supply opportunities in the off-farm§labor market at a later period. We develop an§agricultural household model based on a two period§stochastic dynamic programming framework. This shows§that farmer expectations of a lower depth of the§labor market or a lower wage rate in that market in§the next period would lead them to allocate more land§to crops with safer returns. A panel data set from§the ICRISAT survey of the semi-arid areas of India is§used for estimation. As a background, we discuss the§survey villages in detail.