Specific Experience, Household Structure, and Intergenerational Transfers: Farm Family Land and Labor Arrangements in Developing Countries

M. R. Rosenzweig, K. I. Wolpin
1985 Quarterly Journal of Economics  
An overlapping generations model incorporating returns to specific experience is used to demonstrate how three salient phenomena in land-scarce developing countries--the predominance of intergenerational family extension, cost advantages of family relative to hired labor, and the scarcityof land sales--may be manifestations of an optimal implicit contract between generations which maximizes the gains from farmspecific, experientally obtained knowledge. A method for estimating the contribution
more » ... the contribution to agricultural profits of the farm experience embodied in elderly kin based on a three-year panel of household data from India is proposed and implemented. Implications of the theory for market transactions in land and for family extension are also tested using individual farm data and time-series information on rainfall. of land sales are manifestations of an optimal implicit contract between generations which maximizes the gains from (farm) family-specific, experienctially-obtained knowledge. In contrast to other theories,(1) no assumptions are required about capital or land market imperfections, (2) the economic basis for such family labor and land arrangements (the returns to specific experience) can be measured, and(3) testable implications are readily derived. A traditional agricultural setting with constant technology is considered in which the experienced elderly can supply information about the most efficient techniques for coping with previously experienced varieties
doi:10.1093/qje/100.supplement.961 fatcat:26g24onaajffroaygmltuxgh4q