ABSTRACT
This chapter discusses some important features of labour supply and their implications for modeling and outlines the model specification and the estimation procedure for marketable surplus supply and factor demand responses. It describes data used in the model and also discusses some data problem. More and more people have recognised that, after the rural economic reform in 1978, Chinese farmers increasingly have comparative advantages in off-farm work. The most important feature of this model is that it distinguishes two different labour choices, i.e., between on-farm and off-farm activities made by household members. The parameters for marketable surplus are obtained through the joint estimation of consumption functions and supply functions. The chapter examines the effect of off-farm income on marketable surplus supply while grain prices were rising in China. The theoretical framework demonstrated that the farm households’ supply behaviour depends not only on the profitability of farm production, but also on alternative off-farm wage opportunities for household members.
