Agricultural Labor Supply and the Impacts of Environmental Sustainability Policies

Gridded Integrated Assessment Models (IAMs) is a useful approach to model agricultural production using spatially explicit information on input use and simulate the impact of environmental sustainability policies. Notwithstanding the importance of labor markets in the agricultural sector, there has been limited focus on explicitly modelling agricultural labor. In this paper we highlight the importance of modelling agricultural labor market decisions at a spatially explicit scale since the nature of labor demand is closely linked to the crop produced on the farm. While agricultural labor markets are complex and constitutes of different types of labor, such as migratory, foreign-born, family and hired labor, it is important to realistically model labor market mobility. There is increasing evidence on agricultural labor shortages in advanced agricultural sectors and we argue here that labor immobility can dampen the impact of environmental sustainability policies. We present a version of the Simplified International Model of agricultural Prices, Land use and the Environment – Gridded (SIMPLE-G) by incorporating Commuting Zones that delineates a cluster of counties with strong commuting ties between residence and work. We use this model to re-examine the impact of environmental sustainability policies presented in which subsumes labor under into a composite input (i.e. non-land) which is implicitly perfectly mobile at the grid level. Preliminary analytical results from a two-input model shows that impact of such policies will be reduced at the grid level due to immobility of labor. In order to better understand the gridded results and delve deeper into the underlying structure, we propose a novel ‘mini-model’ approach. The ‘mini-model’ is extracted by leveraging the gridded market clearing structure of SIMPLE-G and using an analytically tractable number of grids. We use the ‘mini-model’ approach to identify policy levers that can alleviate environmental stresses.