Allocative efficiency, the aggregation of labour inputs, and the effects of farm size and tenancy status: Tests from rural Bangladesh

The article focuses on tests of labour aggregation and profit maximising behaviour of farmers in a village in Bangladesh. Special emphasis is placed on the role of farm size and the tenancy status. Although unconstrained profit maximising behaviour does not generally characterise the behaviour of farmers in the village, the behaviour of farm operators is consistent across farm size and tenancy status. This supports the proposition that share‐tenants and operators of small farms make resource allocation decisions which are consistent with the decisions made by owner‐operators and operators of large farms, respectively. In addition, labour inputs, heterogeneous in terms of age and sex, may justifiably be aggregated on the basis of relative wages.