Subsidy Effect on Hired Labour Demand For Agricultural Households in Tanzania
DOI:
https://doi.org/10.26437.ajar.03.2022.11Abstract
Purpose: This paper intended to investigate whether agricultural households in Tanzania use their portion of income gained through compensation variation from agricultural input subsidies, as a production management strategy by outsourcing hired labour to revamp crop production.
Design/Methodology/Approach: The study employed a quantitative research approach through Fixed Effects (FE) technique using a sample of 5,347 observations. The sample consisted of three rounds of secondary panel data from 2010/2011 to 2014/2015 accessed from the World Bank-Living Standards Measurement Study-Integrated Survey for Agriculture (LSMS-ISA).
Findings: The findings were robust across seed, fertilizer and pesticide input subsidies revealing that; input subsidy has a positive effect on the demand for hired labour for agricultural households in Tanzania.
Implications/Research Limitations: Policymakers should institute policies related to agricultural input subsidy schemes to revamp agricultural production. This is because rural households in Tanzania use their portion of income gained from such subsidies to hire effective labour as an agricultural production management strategy. This initiative could be a means to address the key issue of poor labour productivity faced by the agricultural sector in Tanzania which is predominantly carried out by rural households. The limitation of this study was the lack of data before the study period which has restricted the use of the Difference in Differences (DID) approach.
Originality/Value: The study contributes to existing literature through a novel idea for Sub-Saharan Africa (SSA) on how to revamp agricultural production through a prudent practice of outsourcing hired labour for countries that adopted agricultural input subsidy schemes. This shall compensate for the contemporary labour deficit caused by rural to urban labour migration and the ongoing agricultural labour exit to non-agricultural sectors given the prevailing ineffectiveness of household labour revealed by previous studies.
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