Household Behavior with Imperfect Labor Markets

Abstract

A household model with differential asset endowments and idiosyncratic transactions costs in accessing labor markets is developed to (1) explain membership of farm households to alternative labor regimes (sellers, employers, or self‐sufficient in labor), (2) test for recursivity between production and consumption decisions selectively by labor regime, and (3) identify the determinants of differential labor productivity across labor regimes. The model is applied to a 1994 household survey of the Mexican land reform sector.