Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models

This paper tests the separation of farm labor supply and labor demand decisions, using the observation that household composition is an important determinant of farm labor use with nonseparation. After assessing the conditions under which the test has power against several alternatives, an empirical model is developed to test the proposition that farm employment is independent of family composition. The model is estimated on a data set from rural Java. The null hypothesis that farm labor allocation decisions are independent of household structure is not rejected. The results are robust to different specifications of the labor demand function. Copyright 1992 by The Econometric Society.