Agricultural factor markets in Sub-Saharan Africa: an updated view with formal tests for market failure

Type Working Paper
Title Agricultural factor markets in Sub-Saharan Africa: an updated view with formal tests for market failure
Author(s)
Publication (Day/Month/Year) 2014
URL http://faculty.washington.edu/bdillon2/CV_papers/Dillon Barrett 2015 market failure WP.pdf
Abstract
This paper uses the recently collected Living Standard Measurement Study–Integrated Surveys
on Agriculture Initiative data sets from five countries in Sub-Saharan Africa to provide a
comprehensive overview of land and labor market participation by agrarian households and to
formally test for failures in factor markets. Under complete and competitive markets, households
can solve their consumption and production problems separately, so that household factor
endowments do not predict input demand. This paper implements a simple, theoretically
grounded test of this separation hypothesis, which can be interpreted as a reduced form test of
factor market failure. In all five study countries, the analysis finds strong evidence of factor
market failure. Moreover, those failures appear general and structural, not specific to
subpopulations defined by gender or geography.

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