When considering the different mechanisms through which participation in modern supply chains could affect households’ labour allocation decisions, the specificity of agricultural households in developing countries should be accounted for. Following the seminal work of Singh et al. (1986), agricultural household models have been used to analyse the microeconomic behaviour of farm families and households. In the context of small producers and rural households, the allocation of available labour between farming and household activities is subject to a common decision and not fixed by institutional arrangements. An important assumption of these models is related to the separability of the production and consumption sides of the agricultural households (Lopez, 1986; Singh et al., 1986) which allows among others for a distinct analysis of the off-farm, family on-farm and hired labour decisions (Wang et al., 2007). In many developing countries, factor markets fail, which questions this assumption and may lead to a situation of non-separability (Lopez, 1986;
Page | 15 Taylor and Adelman, 2003) in which households’ production and consumption decisions are both affected by the household’s preferences (Le, 2010), and should then be considered simultaneously (Sadoulet and de Janvry, 1995). This is relevant to the analysis of the effects of modern supply chains on participating producers’ hired labour demand and off-farm labour supply.
2.2.2 Impact pathways
With respect to the effect on on-farm hired labour demand, a first impact pathway is directly related to the labour intensity of these lines of production. Indeed, as mentioned in the introduction, these supply chains have mostly been focusing on high-value commodities, in particular horticultural products (Maertens et al., 2012). These commodities are more labour intensive than other crops (Weinberger and Lumpkin, 2007). To this has to be added the role of quality requirements and standards since the cultivation of high-standards products would require producers to invest in agricultural inputs, including labour (Swinnen et al., 2015).
Thus, we can expect that, with higher quality requirements, household needs in labour will be higher and hired labour demand would increase, should the household’s family labour endowments not be sufficient to respond to this labour intensity.
Moreover, if large profits and gains are recorded by these households, they may decide to allocate higher shares of their land and agricultural production to this specific line of production. This has for instance been observed in the case of producers supplying vegetables to supermarkets in Kenya (Rao and Qaim, 2011; 2013). This would potentially reflect a farm specialization and lead to a self-reinforcing hired labour demand over the production seasons.
Higher farm profits and generated commercial surplus could also help households overcome the liquidity and credit constraints which may hamper investments in their farming activities (Reardon et al., 1994; Oseni and Winters, 2009). In this respect, it is also noteworthy that buyers in these supply chains (e.g. exporters, supermarkets, agro-processors) can help their suppliers overcome these constraints by facilitating their access to credit (Minten et al., 2009;
Miyata et al., 2009). Releasing some of these financial and liquidity constraints could affect positively hired labour demand for both the very crops produced for these supply chains as well as for broader farm activities.
Modern supply chains can also potentially affect these households’ participation in off-farm labour markets through various pathways. First, literature has stressed that various factors could motivate rural households to diversity their income and enter the rural non-farm and off-farm economy, and which could be differentiated on the basis of “pull” and “push” factors
Page | 16 (Barrett et al., 2001; Reardon et al., 2007; Davis et al., 2009). These two types of factors, as this was well posited by Reardon et al. (2007), obey to different logics. The former is generally linked to “accumulation objectives” and the latter to the necessity to “manage risk, cope with shock, or escape from agriculture in stagnation” (Reardon et al., 2007). We hypothesize that participation in modern supply chains could serve as a “pull” factor for the households’ entry or strengthened involvement in the off-farm labour markets. Indeed, commercial agriculture and increased farm incomes can be seen as a potential “pull” factor favouring households’ participation in the non-farm economy (Barrett et al., 2001; Haggblade et al., 2010). This makes sense as they may help overcome some of the entry barriers impeding their access to non-farm activities (Reardon, 1997). As mentioned by Haggblade et al. (2010), higher farm incomes could provide the capital available for investment in off-farm activities. Participation in modern supply chains could thus help producers and their households building up and accumulating their capital and investment capacity to enter more profitable self-employment enterprises and other off-farm activities. At a broader scale, Maertens and Swinnen (2009) have stressed that, in their research setting, the restructuration of the French beans export supply chains in Senegal was accompanied by a shift of various producers from contract farming to working as an employee in this sector. One could thus contemplate that participation in export supply chains as supplier could also lead some of the members from contracted households to enter in parallel these supply chains as agro-processing employees, besides the other potential activities generated along the supply chain.
Reflecting on the aforementioned potential non-separability of their labour choices, the interdependence of on-farm and off-farm labour decisions may play a role in these impact pathways. On one hand, a higher price of farm output may reduce the producers and households’ incentives to diversify (Ellis, 2000). This could lead them to focus on this specific farming activity, hence reducing their level of off-farm activities. On the other hand, if households decide to further diversify into non-farm activities, this may potentially lead to a substitution of family labour by cheaper hired labour (Rao and Qaim, 2013). From the perspective of the age-specific effects, this could benefit rural youth since they may be a cheaper labour force. Thus, should these effects be interdependent, their direction remains unclear.
2.2.3 The rationale for an age-disaggregated approach
These households should be perceived as collective households, with an intra-household allocation and decision-making process for their individual members’ resources (Doss, 1996;
Page | 17 Vermeulen, 2002). Household members may thus allocate their time and labour endowment to different labour markets, depending on their skills (Ellis, 2000). This consideration is important as the individuals from the different age cohorts and their labour choices may thus be affected differently by the participation in modern supply chains. They could also adjust their choice as a reaction to the latter in diverse ways. This is important when one focuses on the age of the individual household members. While youth are in general more inclined towards taking-up non-farm and off-farm activities (Huang et al., 2009; African Development Bank et al., 2012), the marked needs for social, human and financial capital to enter these may restrain them in doing so and rather favour access to these occupations by older household members.
Thus, in the remaining of the paper, we will analyse these various impact pathways, including for the different age cohorts. We will also consider the potential non-separability of household decisions to properly account for any existing interdependence between on-farm and off-farm labour decisions.