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


Takalign Sakketa


Research Fellow

University of Bonn

Agricultural economist/development economist, impact evaluation of agricultural investment


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.

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

Key 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.

How to use

Invest in rural areas to provide necessities and make them more liveable- invest in agricultural value chain and assist youths in becoming agricultural entrepreneurs
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- such as trade, supply, marketing and improve markets for fertiliser and farm land to make them more accessible for young people

Want to read the full paper? It is available open access

Sakketa, T.G. and Gerber, N. (2020), “Rural Shadow Wages and Youth Agricultural Labor Supply in Ethiopia: Evidence from Farm Panel”, Research in Labor Economics, Vol. 48, pp. 61-105.

About this research

This journal article was part of a collaborative effort


Nicolas Gerber

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

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UN Sustainable Development Goals

This research contributes to the following SDGs

About this research

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

This paper was co-authored


Nicolas Gerber

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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.


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


Shadow wage
Wage accounting for the marginal product cost of labour (wage per unit of labour)
Economic incentives
Financial draws for labour participation, in this case for agriculture
Household labor supply
Amount of individuals and time a particular household can supply to agriculture

Let your research make a social impact

Ben Levett prepared this research following an interview with Takalign Sakketa.