Shadow Wages and Shadow Income in Farmers' Labor Supply Functions

This article extends the current literature on estimating the labor supply function in agriculture by providing a different method to derive the shadow wage and shadow income. The method is based on the observation that the shadow wage is the marginal product of labor at the optimal point of both farm and household production functions. Thus, under certain assumptions on the functional form of the production functions, both the shadow wage and shadow income can be derived without estimating the production function. Using a sample of Vietnamese farmers, the results from the new method are shown to be consistent with the theory.