Doctoral Dissertation Research in Economics: Creating Labor Markets in Rural Tanzania

University Of California-Santa Cruz, Santa Cruz CA

Investigators

Abstract

Title: Agricultural Labor Markets Abstact Efficient labor markets are important for ensuring that the right kind and quantity of labor is employed in the right jobs to increase productivity and ensure economic and social progress. Agricultural labor markets often do not function as well as markets for many goods for a variety of reasons, including the high cost of job search. The result of this is that employment, productivity and incomes in the agricultural sector, especially in low income countries, remain low. This research project will collect original data and use innovative methods to test two possible reasons why agricultural labor markets do not function efficiently to channel labor to where it is most needed: (i) high costs of job search and (ii) lack of credit to finance employment. The results of this research will provide inputs into the formulation of labor market policies generally and agriculture particularly. The results are applicable to labor markets in low income countries and would thus help the US target its aid policies more efficiently. By improving the efficiency of agricultural labor markets in low income countries, the results of this research would indirectly help US businesses market agricultural inputs to farmers in these countries as more and appropriate type of labor is employed in this sector. Efficient agricultural labor markets are important for two reasons: labor is the most important input in rural economies in LDCs and labor misallocation decreases agricultural productivity. This proposal will use experiments to test two sources of labor market frictions: high search cost due to limited information and credit constraints faced by farmers. The researchers will design and implement a village level randomized field experiment in which treated groups receive job announcement information via text messages, a hiring loan, or both and a control group that does not receive anything to test these hypotheses. The experimental design will allow the researchers to identify a causal effect of search cost and credit constraint on rural labor markets. The design can be adapted to study other markets and the results could provide economists a better understanding of the frictions in rural labor market. This is an important contribution to the development economics literature. The data collected by the researchers will be made available to future researchers. The results of this research will inform US policies on rural labor markets as well as guide the formulation of US aid policies. This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.