| Sumario: | This paper investigates the elasticity of hired labor demand in Malawian small-scale, nonfarm, enterprises to illustrate some key issues in considering employment policy in the less-developed country (LDC) context where such enterprises comprise a large share of the labor market. It is argued that recognizing the household character of production has important bearing on the estimation and understanding of the hired labor demand function. A variant of the household production models, which have become prevalent in analyses of underdeveloped agriculture, is used to demonstrate conceptual differences from conventional studies of labor demand. Of particular relevance is the conclusion that the disemployment effect of wage hikes is likely to be smaller than in the more conventional enterprise and that the demographic composition of the household will affect employment patterns. Reprinted by permission of the publisher.
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