Institutional environment, ideological commitment, and farmers' time allocation: The case of Israeli Moshavim

The objective of this article is to examine the effects of the institutional setup on the time allocation of farmers. I investigate Israeli cooperative villages (Moshavim) that implement cooperative ideology differentially. Not working off the farm used to be part of that ideology. However, by 1981 most farm households had at least one adult member working off the farm. The fraction of off-farm workers varied considerably across cooperatives. Institutional structure can affect time-allocation decisions in several ways. First, there might be an explicit constraint or an implicit penalty on off-farm work. Second, stronger cooperatives (in the sense of having a more effective central management) may enhance the profitability of farming and, hence, indirectly induce members to work more on the farm and less off the farm. Both cooperative strength and ideological commitment are hypothesized to affect time allocation in the same way, namely, to reduce off-farm work and increase farm work. I test this hypothesis by examining the effects of cooperative attributes that proxy for these features on farmers' on-farm and off-farm labor-supply functions. This article emphasizes the effects of the institutional setup. Although it uses data on farm households in a relatively developed agricultural sector (Moshavim in Israel), the findings are perhaps more relevant to developing countries in which institutional constraints on the choices of farmers are more abundant. J. M. Guttman and N. Haruvi studied off-farm work participation rates in Moshavim and related them to the level of cooperation, using village-level variables. In contrast, in this study I explicitly model individual behavior and control for personal, family, and farm attributes. In addition, this article adds another dimension to the existing literature by estimating the off-farm labor-supply function jointly with the on-farm labor-supply function. This has been done before, mostly with respect to participation decisions. Since on-farm and off-farm labor supply are strongly negatively correlated, a joint estimation yields more efficient estimates. The institutional structure of Moshavim and its effect on time allocation are discussed in the following section. Next, I briefly review the theory of time allocation in farm households and discuss the comparative statics of the institutional structure. After that, I describe the data set, develop the empirical model, and report the estimation results. I find that in stronger and more ideologically committed cooperatives, farmers work less off the farm and more on the farm. The article concludes with a summary of the findings and their relevance.