Human health is frequently omitted from household-level studies on agricultural productivity, land-use choices, and forest degradation and deforestation. Intuition, however, suggests that it could be an extremely important factor. This dissertation is built on three essays that use household survey data from the Brazilian Amazon to examine the conditions under which human health and other critical market conditions are important factors in determining household agriculture production choices and efficiency. Essay I (Chapter 2) examines how health affects the labor allocation and production choices of migrant smallholders in the Brazilian Amazon. We show that the impacts of illness on household decisions depend critically on labor market function in the rural areas of the tropics. Furthermore, results from a formal statistical test of the labor markets shows that they do not work well, in other words are incomplete or thin, in the study area. These results are important both in specification of future smallholder household economic models and in targeting policies to better alleviate poverty and encourage more sustainable use of forest and land resources in similar tropical regions. Essay II (Chapter 3) investigates the role of health as a productive input and non-input factor of production. By using a non-neutral stochastic production approach, the impact of health is decomposed into direct effect on the production function and indirect effects on technical efficiency. The finding of the essay suggests that poor health has significant negative impacts on rural household production. The most important policy implication is that careful designing of agriculture development and rural settlements programs is important, and the provision of health care should be tied to these development projects. Essay III (Chapter 4) examines the demand for labor applied to land clearing, staple food production, livestock, working off-farm, and time taking care of sick people in the household. Specifically the empirical application examines the impact of disease on labor allocation, accounting for time lost by households taking care of sick members as a non-productive activity. Disease plays an important role in household decisions because farm activities are performed inefficiently by sick households and changes in household labor efficiency brings about a change in the relative price of competing uses for a household's time. Chapter 5 provides a summary and general conclusion of the work, and then provides comments on policy design and recommendations for further studies. In summary, the combined results of these studies show that both health condition and the quality of labor markets have significant interacting impacts on the labor allocation decisions by smallholders with accompanying welfare and deforestation implications. / Doctor of Philosophy / Most of the rural population of the Brazilian Amazon is made up of small-scale farmers – the so-called 'smallholders' – who are characterized by a lack of access to formal credit, a disconnection from social services, poor access to markets, and a dependency on their own labor as the main input in agricultural production, and thus survival. Since labor is the main input used in smallholder activities, albeit to different extents, anything that changes total household labor or labor efficiency adjusts the relative returns of competing uses, and thus labor allocation decisions. This PhD dissertation is an effort to understand whether markets, family health, and seasonality affect labor allocation decisions, and furthermore, whether those allocation decisions vary depending on productive activity. Based on cross-sectional farm data from the Brazilian Amazon, I find that the impacts of illness on household decisions depend critically on how well labor market function in rural areas. The results from a statistical test of the labor markets shows that they do not work well in the study area. These results are important both in specification of future smallholder household economic models and in targeting policies to better alleviate poverty and encourage more sustainable use of forests and land resources in similar settings. Also, I find that poor health has a significant negative impact on technical efficiency of rural household farm production. The most important policy implication is that careful designing of agriculture development and rural settlements programs is important, and the provision of health care care should be tied to these development projects. Finally, in the context of the region of study, where labor markets are thin, disease plays an important role on in household decisions because farm activities are performed inefficiently by sick households and change in labor efficiency brings about a change in relative prices of competing uses of household's time. My empirical work supports the hypothesis that health influence labor allocation decisions. In conclusion, the combined results of these studies show that both health conditions and the quality of labor markets have significant interacting impacts on the labor allocation decisions by smallholders with accompanying welfare and deforestation implications.