Labor Allocation under Income Surplus: A Coastal Farming Case in Yogyakarta, Indonesia

¹ Agricultural Economics Study Program, Faculty of Economics and Management, IPB University, Indonesia
² Department of Agribusiness, Faculty of Agriculture, Universitas Muhammadiyah Yogyakarta, Indonesia
³ Department of Resources and Environmental Economics, Faculty of Economics and Management, IPB University, Indonesia
⁴ Department of Agribusiness, Faculty of Economics and Management, IPB University, Indonesia

^* Corresponding author: muhammad.fauzan@umy.ac.id

Abstract

Coastal farming households in Indonesia face structural labor underutilization despite high reliance on on-farm activities. In recent years, income diversification and labor shifts toward non-farm sectors have become increasingly visible, particularly in dynamic coastal areas. This research investigates the structure of household income and labor allocation among coastal farmers in Yogyakarta while also exploring how surplus income influences their labor choices. A descriptive analysis was used to examine the distribution of labor across on-farm, off-farm, and non-farm sectors. A household economic model was developed to capture behavioral responses under surplus conditions using a system of simultaneous equations comprising 30 structural and 12 identity equations. The results reveal that while on-farm horticulture remains dominant, non-farm work absorbs a substantial share of household labor. Under income surplus scenarios, households significantly reduce internal family labor, increase hired labor, and shift resources toward non-food consumption and leisure. These patterns underscore a household preference for utility maximization over mere profit-seeking behavior, highlighting the need for agricultural policies that enhance productivity, accommodate labor preferences, and support multisectoral livelihood strategies.