Large segments of the rural Timorese population survive on subsistence
farming characterized by simple production methods and
low output. Broad-based improvements in Timorese living standards
require increased agricultural output. This article discusses
what determines agricultural development in Timor-Leste and
how such development can be achieved. The main causes of low
agricultural output are found to be scarcity of land and capital,
poor technology and education, and lack of government support,
such as extension services and provision of infrastructure. We
construct a model of an agricultural household to examine how
increased market incentives will affect agricultural output and incomes.
The effects of different price changes on household production,
consumption, sales, income, and leisure are investigated.
We find that the objective of increasing the living standard of
Timorese farmers may in part be achieved via increased earning
opportunities outside agriculture.