RURAL LABOR MARKETS AND FERTILITY IN THAILAND: AN EXTENSION OF THE NEW HOUSEHOLD ECONOMICS TO INTEGRATE INSTITUTIONAL AND SUPPLY-SIDE ASPECTS (TRANSFORMATION, CHILD LABOR VS. CHILD HEALTH, TRANSACTION COSTS, AGRICULTURAL ORGANIZATIONS, AGENCY COSTS)

This study extends the New Household Economics (NHE), which is a demand theory of fertility based on neoclassical economic framework, to integrate both supply-side and institutional aspects. The NHE has laid the necessary foundation for fertility studies. But since observed fertility in rural developing countries tends to reflect the supply side due to costly contraceptions, this study incorporates the supply side into the NHE by expanding the proposed NHE-type model to capture various supply-side factors.;The purpose of this study is to explain the fertility transition and the rural transformation in Thailand using the theory extended here. The second-best efficiency principle, not abstracting from transaction costs, of the NIE provides a fundamental explanatory framework for interpreting the results.;The main findings reveal that the fertility transition and the concomitant increase in child quality are a rational outcome. The outcome responds to changing organizational choice (from families to markets and, finally, to labor-saving arrangements) in light of lower excess burden of using markets than that of using families as development continues. Such an outcome reflects an attempt of farm households to minimize transaction costs or excess burden, thereby satisfying the second-best efficiency rule. The outcome also responds to an increase in the opportunity costs of wife's time as specialization proceeds with development. In addition, it is a response to changing supply-side factors, particularly family-planning practices caused by the lower costs.;Also, being rooted in neoclassical economic framework, the NHE uses the ordinary tools of price theory to explain nonmarket resource allocation. Which activities are organized by households and which organized by markets are therefore taken as given. This study extends the NHE to integrate institutional aspects by resorting to the New Institutional Economics (NIE), which is a method of extending neoclassical economic theory to explain nonmarket institutions. In this regard, the proposed NHE-type model is converted into an accounting profit-maximization model to allow for non-zero transaction costs or excess burden. With the presence of transaction costs, the institutional choice--either family institution or market-oriented one--as related to fertility choice will become endogenous and can thus be predicted.