(DP 1986-09) Rural Labour Markets, Transaction Cost and Fertility

Abstract

The implications of differences in transaction cost environments on the fertility and nutrition decisions of rural households are analyzed. Losses from shirking and the supervision cost incurred create a wedge between the marginal revenue product of hired labour and the offered wage and the difficulty of monitoring and enforcing labour contracts leads to a premium on family labour. Differences in enforcement difficulty is related to the transaction cost in varying environments. Thus, differences in transaction cost environments should have different effects on fertility and labour supply. Using data from Laguna province in the Philippines, the study finds some support for the hypothesis that transaction cost has a strong influence on labour supply and fertility.