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Modeling Farm Households' Price Responses in the Presence of Transaction Costs and Heterogeneity in Labor Markets
Author(s) -
Henning Christian H.C.A.,
Henningsen Arne
Publication year - 2007
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2007.00980.x
Subject(s) - transaction cost , economics , consumption (sociology) , variable (mathematics) , production (economics) , database transaction , labour economics , microeconomics , econometrics , mathematical analysis , social science , mathematics , sociology , programming language , computer science
We develop a farm household model to analyze price responses of farm households. This model incorporates various types of transaction costs as well as labor heterogeneity. Nonproportional variable transaction costs or labor heterogeneity imply that production and consumption decisions become nonseparable, even when the household buys or sells labor. An empirical model is estimated using data from Midwest Poland. The results show that nonproportional variable transaction costs and labor heterogeneity significantly influence household behavior. Not all price elasticities, however, change significantly if these are neglected.