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

Change at Home, in the Labor Market, and On the Job

ISBN: 978-1-83909-933-5, eISBN: 978-1-83909-932-8

Publication date: 23 November 2020


Within the framework of potential efforts and strategies to employment generation for young people in Africa in general and Ethiopia in particular, the agricultural sector is increasingly considered as an important sector and a valuable means for poverty reduction, the promotion of economic development, and youth's economic independence. Renewed hope is placed on the sector to offer sustainable livelihood prospects for the rural youth. Yet, the success and sustainability of the sector require a proper understanding of how households allocate youth labor time in the sector and whether agricultural labor supply is responsive to economic incentives such as shadow wages. Using gender- and age-specific plot-level panel data, we systematically analyze the impacts of shadow wages of each household member on youth agricultural labor supply across types of farms. The results indicate that agricultural shadow wages matter for the youth's labor supply in the sector, but the impact differs for male and female youth. We also show that trends and patterns of youth labor supply vary across gender and whether they work on their own farm, and so do their labor returns. The results are consistent after controlling for individual heterogeneity and instrumenting for possible endogeneity. Taking into account the intensity of youth's actual involvement in the family farm, own farm or off-farm work instead of their stated intentions, the results challenge the presumption that youth are abandoning agriculture, at least in agricultural potential areas of Ethiopia. Instead, the frequent narrative of youth disengaging from agriculture may be a result of methodological flaws or data limitations. The findings suggest that it is necessary to invest in agricultural development to enhance labor productivity and employability of young people in agriculture.




The research behind this chapter received funding from the European Union's Seventh Framework Programme FP7/2007–2011 under Grant Agreement n° 290,693 FOODSECURE and the German Federal Ministry for Economic Cooperation and Development (BMZ) through DAAD. The authors are thankful to Ethiopian Strategy Support Program of the International Food Policy Research Institute for providing the Baseline data. They are also very thankful to Joachim von Braun for helpful comments and support during the research as well as to the participants in the fifth African Association of Agricultural Economists and to two anonymous referees for all the questions and comments that greatly contributed to improving this chapter. Above all, the authors are very grateful to the respondents for their kind cooperation and valuable time.


Sakketa, T.G. and Gerber, N. (2020), "Rural Shadow Wages and Youth Agricultural Labor Supply in Ethiopia: Evidence from Farm Panel Data", Polachek, S.W. and Tatsiramos, K. (Ed.) Change at Home, in the Labor Market, and On the Job (Research in Labor Economics, Vol. 48), Emerald Publishing Limited, Leeds, pp. 61-105.



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