Marketing of food crops and purchase of industrial commodities by Nyanza smallholders, 1970-1971.

Abstract

We consider the i).lioca.tionproblem of A rurfll household whose income is Awdlable in the form of c+r inventories of farm produce and an Rmount of cash income from non-farm !lctivity. The inventories avail~ble may be sold to earn cash at a price of T. The inventories may be supplemented by pur-chase Cl.tmarket prices w. The budgeting problem of the householrl.is the problem of optimizing both sales of inventories 3.nd the consumption of commodities. The level of purchases are structurally related to inventories through the level of sales and cash income. The optimum ~ales - consumption allocation depends heavLl.y on the demogr-aphf,c composition of the househo Ld, An household with fe"f members needs to reserve less of the inventory for subsistence than a household :·rithmany member-a, The ana Lysd.s emphasizes the effect of changing household composition on the allocative choices made. The model set forth iS3 combination of .'3, system of purchase equations used to explain allocation of consumption and a multivariate logit model used to e;~lain the proportion of inventories Rold. The novel features of the model include! (a) Conditioning the behavior of the household on its initial stocks; (b) The use of transactions cost to define discrete difference A l)et''leensellers and buyers of foodstuffs? (c) Testine for interrel~tionships between the structure of income cour ces and the ~'d.llingness to sell foodstuffs; and Cd) structuring the model to mnke the consecuences of demogr-aphf.c change clearly evident? even ';!henthe existing population is restructured into more or fewer households .•