Estimation of an endogenous switching regression model with discrete dependent variables: Monte-Carlo analysis and empirical application of three estimators

The performances of alternative two-stage estimators for the endogenous switching regression model with discrete dependent variables are compared, with regard to their usefulness as starting values for maximum likelihood estimation. This is especially important in the presence of large correlation coefficients, in which case maximum likelihood procedures have difficulties to converge. Monte-Carlo simulations indicate that an estimator that corrects for conditional heteroskedasticity of the residuals is superior in almost all instances, and especially when maximum likelihood is problematic. This result is also obtained in an empirical example in which off-farm work participation equations of farm women are conditional on farm work participation status. First version received: July 1995/final version received: March 1998     

Revitalising and modernising smallholder agriculture: The Aldeia Nova Project in Angola

The Aldeia Nova Project in Angola is aimed at demobilising ex-combatants to rural areas and settling them in modern agricultural communities. The first settlers arrived in the Waku-Kungu Valley in 2005 and now 600 families are using modern agricultural technology to produce milk, eggs and vegetables, which are marketed in the urban centres. The Project has enhanced the families' livelihoods and provided employment to hundreds of other Angolans, and the entire region has been revitalised, with a large number of new families arriving to enjoy the benefits of the improved local economy. This paper presents the concept of the Project, describes its evolution and discusses its strengths and weaknesses. It concludes that the Project has had benefits beyond its measureable economic impact and that Aldeia Nova's original and ambitious goals are not beyond the reach of the Angolan people.     

Comment: On the Interpretation (and Misinterpretation) of Inequality Decompositions by Income Sources

This paper discusses interpretations of different inequality decomposition rules when inequality is decomposed by income sources. It argues that authors of a recent article based their conclusions on misinterpreted decomposition results. It also argues that marginal effects, derived as elasticities of inequality with respect to uniform increases in income from each source, are easily interpreted and can be compared across different decomposition rules.     

Entrepreneurship and income inequality in southern Ethiopia

This article uses inequality decomposition techniques in order to analyze the consequences of entrepreneurial activities to household income inequality in southern Ethiopia. A uniform increase in entrepreneurial income reduces per capita household income inequality. This implies that encouraging rural entrepreneurship may be favorable for both income growth and income distribution. Such policies could be particularly successful if directed at the low-income, low-wealth, and relatively uneducated segments of the society.     

Intergenerational Succession in Small Family Businesses: Borrowing Constraints and Optimal Timing of Succession

Small family businesses differ from non-family businesses in that their functioning is not independent of the life cycle of the owner-operator, and in that other family considerations sometimes lead to sub-optimal managerial decisions from the point of view of the business. This is why a smooth intergenerational succession is essential to the profitability of the business, and to the welfare of the family as a whole. Succession within the family involves first of all the choice of a successor. The choice is affected by birth order, age differentials, and qualifications of potential successors. Choosing a successor means reaching an agreement about the timing of succession and income distribution before and after succession. This paper focuses on the decision of the business-operating family when to bring in the designated successor. A utility-maximizing time is shown to differ from the income-maximizing time only in the presence of binding borrowing constraints. Such constraints are likely to enhance an earlier succession in order to use the successor's accumulated off-business assets to ease the constraints and to increase future business income due to earlier accumulation of business-specific human capital by the successor. An additional model shows that the successor will not be willing to wait indefinitely for the formal ownership transfer of the business, because of the risk of being disinherited in some future period. The consequences of possible strategic behaviors of both the owner and potential successors on the results of these models is discussed informally.     

Off-Farm Work Participation of Israeli Farm Couples: the Importance of Farm Work Participation Status

This article claims that coefficients of off-farm work participation equations for farm residents might be estimated inconsistently if selectivity based on farm participation is ignored. Participation equations will be different for farm residents who do not work on farm, especially with respect to the dependence of reservation wages on farm attributes. I estimate an endogenous switching regression model in which farm and off-farm participation equations are estimated jointly while the off-farm participation coefficients are different for those who work on farm and those who don't. Using the 1981 Israeli Census of Agriculture data, I reject the hypothesis of insignificant selection bias and the hypothesis of equal coefficients in the two subsamples.     

Labor Supervision and Institutional Conditions: Evidence from Bicol Rice Farms

This article analyzes labor supervision activities reported in a survey of rice farmers in the Bicol region of the Philippines. We present a theoretical model that relates supervision intensity to institutional conditions. We estimate a supervision intensity equation and control for the decision to hire labor, the decision to supervise hired labor, and the type of the labor contract. The empirical estimates use different village-level spatial and demographic indicators as proxies for institutional conditions. The results are consistent with the prediction of the theoretical model that supervision increases with weaker institutional conditions.