Inframarginal Model Analysis of the Evolution of Agricultural Division of Labor

Abstract

Division of labor plays a critical role in many parts of agriculture. For example, a specialized division of labor can lead to the improvement of labor productivity, the reduction of production costs, and the innovation of production technology and organization. At the heart of agricultural management is how the comparative advantages of farmers impact their production decision-making behavior, and, consequently, influence the division of labor structure. In this paper, we apply an infra-marginal model to interpret the selection logic of heterogeneous farmers’ specialized production with exogenous comparative technical advantages and transaction costs. Solving the nonlinear programming problem of the utility function within each respective labor structure leads to a corner equilibrium. Under reasonable assumptions of the model, we reduced the number of possible production–consumption decision modes from the maximum of 64 to an optimal of 3. Through this analysis, we discovered the ranges for transaction efficiency coefficients and preference parameter under which each structure can achieve general equilibrium. Our theoretical model thereby explains the structural evolution of agricultural division of labor.