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Subsistence Response to Market Shocks

Author

Listed:
  • Dyer, George A.
  • Boucher, Steve
  • Taylor, J. Edward
Abstract
Micro-economic models posit that transaction costs isolate subsistence producers from output market shocks. We integrate microeconomic models of many heterogeneous households into a general-equilibrium model and show that supply on subsistence farms may respond, in apparently perverse ways, to changes in output market prices. Price shocks in markets for staple goods are transmitted to subsistence producers through interactions in factor markets. In the case presented, a decrease in the market price of maize reduces wages and land rents, stimulating maize production by subsistence households; however, real income of subsistence households falls.

Suggested Citation

  • Dyer, George A. & Boucher, Steve & Taylor, J. Edward, 2005. "Subsistence Response to Market Shocks," Working Papers 190906, University of California, Davis, Department of Agricultural and Resource Economics.
    • Handle: RePEc:ags:ucdavw:190906
    DOI: 10.22004/ag.econ.190906
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    References listed on IDEAS

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