Demographic composition of farm households and its effect on time allocation

The decisions of farmers to work on or off the farm depend in part on household composition and the participation patterns of other family members. This is because of the differential income effects resulting from the household's joint budget constraint and the time and money costs imposed by different household members, and because of the substitutability or complementarity between the farm labor inputs of different household members. This paper demonstrates this point by estimating a joint labor participation model of farm operators and their spouses, in which participation decisions are conditioned on household composition. The model is estimated as a multivariate probit model with fixed effects, by quasi maximum likelihood methods. The results are consistent with the hypotheses that the time costs imposed on the household by small children are larger than the money costs; that the relative importance of time costs is decreasing as children grow up; and that the farm labor inputs of older children are complements to the couple's farm labor inputs but those of prime-age adults are substitutes. JEL classification: J22, J43An earlier version of this paper was presented at the 1994 meeting of the European Society for Population Economics, Tilburg, The Netherlands. This research relies in part on my Ph.D. dissertation at the University of Chicago. I am grateful to Gary Becker, Joe Hotz, Yair Mundlak, Kevin Murphy, and Yoram Weiss for their useful suggestions and guidance. The research was completed while I was visiting at the University of Maryland. I thank the Department of Agricultural and Resource Economics and the Maryland Agricultural Experiment Station for financial support. Specific constructive comments were also made by Paul Schultz, John Ermisch, and anonymous referees. Finally, I express my gratitude to the staff of the Central Bureau of Statistics in Israel, especially Haim Regev and Meir Rothchild, for providing the data used here. Responsibility for the contents of this paper remains exclusively mine.Responsible editor: John F. Ermisch