By Professor Inderjit Lyn Singh
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Extra info for Agricultural Household Models: Extensions, Applications, and Policy
Fertilizer is barely used in the Sierra Leone and northern Nigeria samples and therefore was not modeled. use information on the underlying structure of preferences to calculate equivalent or compensating variation. The percentage change in real income among the six countries under consideration is less than the percentage change in either the output price or the fertilizer price (table 1-4). In addition, it appears that the loss in real income arising from a given percentage reduction in the output price can be offset only if the price of fertilizer is reduced by a much larger percentage.
What can agricultural household models tell us about these effects? An increase in the price of an important agricultural staple will obviously hurt households that are net consumers of that item. The direct effect of a price increase will therefore be unambiguously negative for landless households and nonfarm households.
Policymakers are also concerned with the welfare of rural households Landless households either that do not own or rent land for cultivation. sell their labor to land-operating households or else engage in nonfarm activities (see, for example, Anderson and Leiserson 1980). Although governments have few policy instruments by which to improve the welfare of these households directly, price interventions and investment programs directed at land-operating households have spillover effects that may (or may not) be beneficial for these households.
Agricultural Household Models: Extensions, Applications, and Policy by Professor Inderjit Lyn Singh