Homogeneity of Farm Labor: A Dual Approach

The assumption of homogeneity between family and hired farm labor is common in farm labor research. Controlling for region and farm size, this study employs a seemingly unrelated regression analysis to jointly estimate a translog cost function and factor cost shares to determine the elasticity of substitution between hired and family farm labor. The results show an evidence of heterogeneity of farm labor in both cash grain and hog farms in the U.S. There is further evidence that the elasticity of substitution is unitary and the cost minimizing ratio of hired and family labor is not independent of time. Regional factors were found to have little effect on the substitutability of farm labor, whereas farm size was found to have a significant influence on the relationship between hired and family labor