This paper tests the hypothesis that agricultural households engage in intermittent wage labor
as a way to smooth consumption in the face of idiosyncratic shocks to agricultural income. Using
data on agricultural households from the Tanzanian LSMS-ISA National Panel Survey and global
commodity price data as a source of plausibly exogenous variation, the sensitivity of wage labor
to farm income shocks is estimated. The idiosyncratic shock to post-harvest income is estimated
by incorporating pre-harvest information, including local farm-gate prices as instrumented by
global commodity prices. The results show that households are more likely to select into wage
labor and work more hours in response to negative income shocks. Positive income shocks are
shown to have a weakly negative effect on selection into wage work and hours worked. This
response may help to explain the lack of an observed relationship between consumption and
income shocks if wage labor can be thought of as an informal insurance mechanism which allows
households to effectively smooth their consumption.