Research Fellow | University of Bonn
Horn of Africa

Rural Shadow Wages and Youth Agricultural Labor Supply in Ethiopia: Evidence from Farm Panel Data

Decent Work and Economic Growth

The success and sustainability of the agriculture sector in Ethiopia require a proper understanding of how households allocate youth labor’s time and whether agricultural labor supply is responsive to economic incentives such as shadow wages. This research explores these questions.

References

Journal article: Rural Shadow Wages and Youth Agricultural Labor Supply in Ethiopia: Evidence from Farm Panel Data (2020)
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Co-authors:

About:

This research used a quantitative approach, combining economics and household survey.

The study is based on household and youth panel survey conducted in Oromia region of households selected for the Ethiopian government's Agricultural Growth Program (AGP). An econometric approach was applied to the data.

However, the estimation of shadow wage makes assumptions, for example that increasing labor supply equally increases productivity/output. In reality this may be non-linear. Furthermore, working hours were self-estimated by participants, so are liable measurement errors

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Funding:

This research was funded by an external organisation, but detail has not been provided.

Key points

  • Young people’s participation in agricultural activities is dependent on economic viability and opportunity, which should be promoted.

This study investigates trends and patterns of youth’s labour supply in agriculture using a calculated shadow wage as an alternative to market wages.

Findings

  • Youths provide valuable contributions to family level agriculture.
  • The perception that young people are not interested in agriculture is not based on evidence, but their participation requires farming to be profitable and training/market opportunities to be accessible.
  • Investment in youth participation in agriculture could be a good strategy for economic growth and tackling unemployment in areas where agricultural income is high.

What it means

Shadow wage is a more accurate estimate of labor return and agricultural production in settings where markets are imperfect- such as rural areas. Shadow wage can be weakly equated to the productivity of a household or individual.

Rural wage, labour productivity and economic incentives were used to determine the agricultural supply of individuals. This varied by gender, but overall there is no evidence which suggests that youth on-farm participation is decreasing.

How to use

  • Invest in rural areas to provide necessities and make them more liveable
  • Take gender into consideration in making agriculture attractive to young people
  • Strengthen human capital in rural/agricultural areas: Formal education and cultural training activities, health, infrastructure
  • Diversify economic activities that compliment agriculture
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Sakketa, Takalign. 'Rural Shadow Wages and Youth Agricultural Labor Supply in Ethiopia: Evidence from Farm Panel Data'. Acume. https://www.acume.org/r/rural-shadow-wages-and-youth-agricultural-labor-supply-in-ethiopia-evidence-from-farm-panel-data/