A farm-level study of labor use and efficiency wages in Indian agriculture

This paper develops a microeconometric model of farm behavior and examines labor allocation and productivity in an institutional setting where markets are noncompetitive, farms face external constraints in input use decisions and prices, especially wages, may not be exogenously given. We use a farm-level data collected by Agro-Economic Research Center, West Bengal, India for this purpose. The unique feature of the dataset is that it contains information on farm-specific inputs and outputs as well as variables like education, off-farm income, regional location of each farm, etc. The data comes from rural areas of West Bengal where noneconomic constraints are abundant. This gives us an opportunity to test the presence of both efficiency wages and distortions.