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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. 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.
  2. David Neumark, 1998. "Labor Market Information and Wage Differentials by Race and Sex," NBER Working Papers 6573, National Bureau of Economic Research, Inc.
  3. Shing-Yi Wang, 2010. "Statistical Discrimination, Productivity and the Height of Immigrants," Working Papers id:3344, eSocialSciences.
  4. Glewwe, Paul, 2001. "Schools, Skills And Economic Development: Education Policies, Student Learning And Socioeconomic Outcomes In Developing Countries," Bulletins 12969, University of Minnesota, Economic Development Center.
  5. Skoufias, Emmanuel, 1996. "Intertemporal substitution in labor supply: Micro evidence from rural India," Journal of Development Economics, Elsevier, vol. 51(2), pages 217-237, December.
  6. Marcel Fafchamps & Agnes R. Quisumbing, . "Human Capital, Productivity, and Labor Allocation in Rural Pakistan," Working Papers 97019, Stanford University, Department of Economics.
  7. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer, vol. 40(1), pages 1-27, October.
  8. Galasso, Emanuela & Ravallion, Martin, 2005. "Decentralized targeting of an antipoverty program," Journal of Public Economics, Elsevier, vol. 89(4), pages 705-727, April.
  9. 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.
  10. Ranis, G. & Ramirez, A. & Stewart, F., 1997. "Economic Growth and Human Development," Papers 787, Yale - Economic Growth Center.
  11. Swamy, Anand V., 1997. "A simple test of the nutrition-based efficiency wage model," Journal of Development Economics, Elsevier, vol. 53(1), pages 85-98, June.
  12. Paul Schultz, T., 2003. "Wage rentals for reproducible human capital: evidence from Ghana and the Ivory Coast," Economics & Human Biology, Elsevier, vol. 1(3), pages 331-366, December.
  13. Rizov, Marian, 2005. "Pull and push: individual farming in Hungary," Food Policy, Elsevier, vol. 30(1), pages 43-62, February.
  14. Felipe Balmaceda, . "Compensation Methods in Competitive Labor Markets," ILADES-Georgetown University Working Papers inv118, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  15. 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, vol. 60(2), pages 497-527, December.
  16. 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 25823, International Association of Agricultural Economists.

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