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Information, Learning, and Wage Rates in Low-Income Rural Areas

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  • Andrew D. Foster
  • Mark R. Rosenzweig

Abstract

In this essay, we present evidence that employers in rural areas of developing countries have imperfect information with regard to the productivity of heterogeneous workers. In addition to obtaining direct measures of the completeness of employer information we consider the implications of information asymmetries for the structure of casual labor markets. We then evaluate the extent to which casual labor markets do, in fact, exhibit these attributes. We find that: (1) there is adverse selection out of the time-rate labor market; (2) employers discriminate statistically: given two workers with different observed characteristics but the same actual productivity, the worker from the group with the higher average productivity will have a higher wage; (3) employers exhibit learning over time: the extent of employer ignorance is negatively related to labor-market exposure on the part of the workers; and (4) calorie consumption affects productivity but is not rewarded in the time-rate labor market. In concluding we argue that an analysis of wage and employment patterns and the implications of these patterns for human capital investment in rural areas of developing countries that ignored the role of information problems could yield misleading conclusions.

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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Journal of Human Resources.

Volume (Year): 28 (1993)
Issue (Month): 4 ()
Pages: 759-790

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Handle: RePEc:uwp:jhriss:v:28:y:1993:i:4:p:759-790

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Web page: http://jhr.uwpress.org/

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Cited by:
  1. Rizov, Marian & Swinnen, Johan F.M., 2004. "Human capital, market imperfections, and labor reallocation in transition," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 745-774, December.
  2. Judith K. Hellerstein & David Neumark & Kenneth R. Troske, 1996. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," NBER Working Papers 5626, National Bureau of Economic Research, Inc.
  3. Felipe Balmaceda, . "Compensation Methods in Competitive Labor Markets," ILADES-Georgetown University Working Papers, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines inv118, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  4. Galasso, Emanuela & Ravallion, Martin, 2005. "Decentralized targeting of an antipoverty program," Journal of Public Economics, Elsevier, Elsevier, vol. 89(4), pages 705-727, April.
  5. Marcel Fafchamps & Agnes R. Quisumbing, 1999. "Human Capital, Productivity, and Labor Allocation in Rural Pakistan," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 34(2), pages 369-406.
  6. T. Paul Schultz, 2003. "Wage Rentals for Reproducible Human Capital: Evidence from Ghana and the Ivory Coast," Working Papers, Economic Growth Center, Yale University 868, Economic Growth Center, Yale University.
  7. Ranis, G. & Ramirez, A. & Stewart, F., 1997. "Economic Growth and Human Development," Papers, Yale - Economic Growth Center 787, Yale - Economic Growth Center.
  8. Glewwe, Paul, 2001. "Schools, Skills And Economic Development: Education Policies, Student Learning And Socioeconomic Outcomes In Developing Countries," Bulletins, University of Minnesota, Economic Development Center 12969, University of Minnesota, Economic Development Center.
  9. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer, Springer, vol. 40(1), pages 1-27, October.
  10. Shing-Yi Wang, 2010. "Statistical Discrimination, Productivity and the Height of Immigrants," Working Papers id:3344, eSocialSciences.
  11. Emran, M. Shahe & Shilpi, Forhad, 2014. "Land Market Restrictions, Women's Labor Force Participation and Wages," MPRA Paper 57989, University Library of Munich, Germany.
  12. Rizov, Marian, 2005. "Pull and push: individual farming in Hungary," Food Policy, Elsevier, Elsevier, vol. 30(1), pages 43-62, February.
  13. David Neumark, 1998. "Labor Market Information and Wage Differentials by Race and Sex," NBER Working Papers 6573, National Bureau of Economic Research, Inc.
  14. Swamy, Anand V., 1997. "A simple test of the nutrition-based efficiency wage model," Journal of Development Economics, Elsevier, Elsevier, vol. 53(1), pages 85-98, June.
  15. Skoufias, Emmanuel, 1996. "Intertemporal substitution in labor supply: Micro evidence from rural India," Journal of Development Economics, Elsevier, Elsevier, vol. 51(2), pages 217-237, December.
  16. Lanjouw, Jean Olson, 1999. "Information and the operation of markets: tests based on a general equilibrium model of land leasing in India," Journal of Development Economics, Elsevier, Elsevier, vol. 60(2), pages 497-527, December.
  17. Rizov, Marian, 2003. "Human Capital And The Agrarian Structure In Transition: Micro Evidence From Romania," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa, International Association of Agricultural Economists 25823, International Association of Agricultural Economists.

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