By Professor Inderjit Lyn Singh
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Extra info for Agricultural Household Models: Extensions, Applications, and Policy
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.
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.
In Malaysia, for example, a 10 percent reduction in output price whereas a 10 percent rewould reduce real income by almost 7 percent, duction in the price of fertilizer would increase real income by only about 1 percent. This difference arises from the relative magnitudes of marketed surplus and fertilizer use. Thus, if policymakers are interested primarily in the welfare of agricultural households, intervention in output markets is likely to be much more important than intervention in the markets for variable, nonlabor inputs.