Module 1100
Household Behaviour: Theory and Applications

Instructors

Prof. em. Dr. Michael Grings
Martin-Luther-Universität Halle-Wittenberg
Naturwissenschaftliche Fakultät III
Institut für Agrar- und Ernährungswissenschaften
Karl-Freiherr-von-Fritsch-Str. 4, 06120 Halle
e-mail: michael.grings@landw.uni-halle.de

Dr. Stephan Brosig
Leibniz-Institute of Agricultural Development in Transition Economies
Theodor-Lieser-Str. 2, 06112 Halle
e-mail: Brosig@iamo.de

Course description

The course addresses major dimensions of household behaviour from a micro economic point of view with particular focus on specifics of agricultural households.
Part 1 provides introductory remarks on foundations of model based economics.
In part 2 the most important concepts for the analysis of household demand are discussed. Additional dimensions of household behaviour are labour supply and production of agricultural goods, which are considered inasmuch as required for the remaining discussion.
Part 3 discusses the interaction of the consumption, labour supply, and agricultural production spheres in the context of separable and non-separable household models.

In the framework of simple deterministic microeconomic models the mechanics of household responses to economic signals are discussed and in part simulated in computer models. The objective of the course is to deepen the familiarity with and understanding of major concepts of neoclassical economic theory which are relevant for the analysis of the behaviour of rural households in developing and transition countries.

Course outline

Introduction
1. Overview of the course
2. The role of theory and models in scientific reseach
Fundamentals: household demand and supply
1. Theory of household demand and labor supply
  1. Basic concepts
  2. Dual representations of preferences
  3. Labor supply
2. Agricultural production and factor demand
  1. Basic concepts
  2. Profit functions and quasi-rent functions
Agricultural household models
1. The theory of the agricultural household: Overview
2. Separability of production, consumption and labour supply decisions
3. Nonseparability: Missing markets
4. Merits and limitations of household models in contemporary economic research and policy

Teaching methods

Lectures (50 %), classroom exercises and group work (25 %), hands-on computer exercises (25%)
Language: English

Requirements

Participants should have a good knowledge of the basic concepts of the theory of microeconomics (theory of the household and the firm) and a basic knowledge of econometrics.
Notebook computers with MS Excel.

Grading

For a certificate of successful participation the solution of problems (homework after the course) is required.
Credit points: 3 CP

Literature

Chapter 2 (Demand Analysis) and Chapter 6 (Agricultural Household Models) of Sadoulet, E., and A. de Janvry: Quantitative Development Policy Analysis, Baltimore and London 1995, can serve as an introduction to the most important topics of the course. The manuscript of the book is available at http://areweb.berkeley.edu/~sadoulet/papers/Sadoulet_deJanvry%20QDPA.zip
de Janvry, A., Fafchamps, M., & Sadoulet, E. (1991). Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained. The Economic Journal, 101, 1400–1417, DOI: 10.2307/2234892.
Sonoda, T. (2004). “Internal Instability" of Peasant Households: A Further Analysis of the de Janvry, Fafchamps, and Sadoulet Model. The Japanese Journal of Rural Economics, 6, 1-12. doi: 10.18480/jjre.6.1

Selected additional literature

De Janvry, A., & Sadoulet, E. (2016). Development economics: Theory and practice. London: Routledge.
Deaton, A., and J. Muellbauer: Economics and consumer behavior, Cambridge etc. 1980.

Module 1100 Household Behaviour: Theory and Applications