Peasant farmers and pandemics: the role of seasonality and labor-leisure trade-off decisions in economy-wide models

Abstract

Pandemics attack the primary asset (labor) of peasant households and the rural poor. Peasant households must simultaneously allocate labor between farm and household activities, where the demand for agricultural labor is seasonal, which limits intra-temporal substitution, without perfect foresight. A pandemic reduces the supply of labor, through deaths and morbidity, with the scale of reductions in labor supply depending on the seasons in which a pandemic occurs. The analyses, using a recursive dynamic economy-wide model for Bhutan, demonstrate that outbreaks in high labor demand seasons cause increases in wage rates almost three times as high as for outbreaks in low labor demand seasons. Increases in wage rates induce peasant households to reallocate labor time between farm and household activities through the labor-leisure trade-off mechanism. Such changes in the allocation of labor time are important elements of peasants’ mitigation responses, and can reduce the negative economic implications of a pandemic.

KEYWORDS:

• Smallholder agriculture
• COVID-19
• time use
• recursive dynamic computable general equilibrium model
• seasonal labor

Acknowledgements

The authors would like to thank the editor and two anonymous reviewers for their helpful comments and suggestions that helped to improve previous versions of this study. The views presented in this paper are those of the authors’ and not their respective institutions.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 On definitions of the SNA and ‘general’ production boundaries see ISWGNA (2009, chapters 1 and 6)

2 Social reproduction is a theory that has its roots in Marxist feminism. It expands beyond the concept of household production within the economic literature (see Apps & Rees, 2001; Becker 1965).

3 Historic examples of such small-scale domestic production can be found in many countries, e.g., the production of Harris tweed by crofters in the Scottish Hebrides during the winter.

4 Crop cycles are at least one year, depending on crop rotation patterns, while animal production cycles are often several years.

5 If there are complete markets for inputs and credit some limited and minor technology adjustments can be made in a cycle, e.g. substituting chemical controls for weed and pest control.

6 This is similar to the trade costs shocks in global analyses of COVID-19 (Laborde et al., 2020; Maliszewska et al., 2020).

7 In Bhutan, remittances have increased in the first quarter of 2020 probably due to the government initiated return of migrant workers from the Middle East (Royal Monetary Authority of Bhutan, 2020). Other studies on developing economies, e.g. Breisinger et al. (2020) assume reductions in remittances.

8 Bhutan’s borders may stay closed for tourists throughout 2021 and thereafter. Therefore, the analysis likely underestimates the impacts of reduced tourism revenue in the second year and following.

9 Wealthier households can afford private health treatment, but this requires open borders, as Bhutanese usually travel to Thailand for private healthcare.

10 Sensitivity analyses show that the main findings and conclusions are robust towards higher or lower choices of R0.

11 AEZ1 is the humid subtropical zone below 1200 m; AEZ2 is the dry subtropical zone between 1200 and 1800 m; AEZ3 is the temperate zone above 1800 m

12 Primary factors are therefore employed indirectly.

13 The codes for a previous generation of the model are open source (http://cgemod.org.uk/stage1.html).

14 LES is a linear expenditure system.

15 Regular nested CES functions can “provide a second-order local approximation to any cost function if and only if the function to be approximated is globally regular” (Perroni & Rutherford, 1995, p. 336). The nested CES-LES-CES utility function is regular and has the added advantage of encompassing subsistence consumption. In the model, the calibration of the parameters of the utility functions is updated after each solution.

16 Defining the lower bound for T when there is zero leisure at peak labor demand gives a range from 262 (in AEZ3) to 298 days (in AEZ1). 312 days allows for a minimum amount of ‘leisure’ for social reproduction.

17 Lower quantities of leisure will magnify the effects of labor supply shocks.

18 The rates were in line with past rates of labor growth, based on population projections (NSB, 2019).

19 Note that the impacts on the formal (urban) economy including those on skilled and unskilled labor are constant across all local outbreak scenarios.