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Cultivator households in some developing areas use off-farm labor supply as an insurance against crop income shocks, whilst employment is uncertain in this off-farm labor market. This paper hypothesizes that, given limited opportunities for ex post consumption smoothing, employment uncertainty influences risk-averse households' crop choice decisions - they would opt for more conservative crop choices in case they expect unfavorable supply opportunities in the labor market. A two-period stochastic dynamic programming model is developed. A panel data set from the ICRISAT survey of the semi-arid tropics of India is examined. Estimation is based on random effects and fixed effects Tobit specifications.
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