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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.
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