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Abstract

In this paper, we use data from the International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) survey of households in Burkina Faso, to assess market efficiency. Two methods based on testable implications of the Agricultural Household Model (AHM) are used. The first is based on the observation that if markets clear at prevailing prices, the household labor allocation will be such that shadow wages equate to market wages... The second looks for significance of household structural parameters on labor demand ... The remainder of the paper is organized as follows. In Section II, we provide a brief review of the Agricultural Household Model, highlighting the effect of market failure on separability and the role of shadow prices. Section III describes the Burkinabe villages and summarizes the ICRISAT data. In section IV, we then conduct tests of the neoclassical model in order to assess the efficiency of the labor markets. In Section V, we discuss labor supply estimation given the non-linearity of the full-budget constraint on household behavior, and we estimate male and female labor supplies.

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