Rationalizing peasant decisions in a restructuring economy

Abstract

A Neo-Malthusian optimizaton model with efficient consumption is used to represent the economics of the peasantry. The household model includes both the costs of living and production, maximizes the family’s net income, and is connected to the rest of the economy through producto and labor markets. The critical decision of whether or not peasants will continue as farm producers depends on off-farm employment possibilities, crop diversification and the relationship of farm costs to market prices. In all simulations, a production subsidy proved superior to a direct income transfer both for family income and in providing the peasantry incentives to remain as farm producers and not to migrate to urban centers.