Sequential Labor Decisions Under Uncertainty: An Estimable Household Model of West-African Farmers

This paper reports estimates of the primitive parameters of a stochastic control model describing the labor decisions of West African small farmers. Maximum likelihood estimates are computed although optimal labor decision rules cannot be derived analytically. Vuong's non-nested model specification test shows that this method yields estimates superior to those derived by assuming that farmers solve a deterministic control problem. Low levels of labor effort are shown to be a consequence of low labor productivity in archaic rain-fed agriculture and of farmers' awareness that, in the absence of a labor market, overly ambitious production plans lead to seasonal manpower shortages.