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Daily wages and piece rates in agrarian economies

Author

Listed:
  • BALAND, Jean-Marie

    (CRED, University of Namur, Belgium)

  • DREZE, Jean

    (STICERD, LSE and Delhi School of Economics)

  • LERUTH, Luc

    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve and Department of Business Administration, University of Liège, Belgium)

Abstract

The paper presents an analysis of the coexistence of daily-wage and piece-rate contracts in agrarian economies. We show that, when individual effort is taken into account, daily-wage labourers typically form a convex set in the space of working ability. The most able and the least able labourers work on piece rates, as they can thus choose their own level of effort. We also prove that, on a monopsonistic labour market, the use of both contracts in equilibrium results from the profitability of market segmentation. Imperfect substitutability between workers under different contracts and the downwards rigidity of daily wages can also explain the coexistence of the two types of contracts in more general settings, e.g. perfect competition

Suggested Citation

  • BALAND, Jean-Marie & DREZE, Jean & LERUTH, Luc, 1998. "Daily wages and piece rates in agrarian economies," LIDAM Discussion Papers CORE 1998058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvco:1998058
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    References listed on IDEAS

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    1. Carmen Matutes & Pierre Regibeau & Katharine Rockett, 1994. "Compensation Schemes and Labor Market Competition: Piece Rate versus Wage Rate," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(2), pages 325-353, June.
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    5. Anindita Mukherjee, 1994. "The Labour Markets in Indian Villages," Boston University - Institute for Economic Development 34, Boston University, Institute for Economic Development.
    6. Bardhan, Pranab & Rudra, Ashok, 1981. "Terms and Conditions of Labour Contracts in Agriculture: Results of a Survey in West Bengal, 1979," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 43(1), pages 89-111, February.
    7. Seiler, Eric, 1984. "Piece Rate vs. Time Rate: The Effect of Incentives on Earnings," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 363-376, August.
    8. Bliss, C. J. & Stern, N. H., 1982. "Palanpur: The Economy of an Indian Village," OUP Catalogue, Oxford University Press, number 9780198284192, Decembrie.
    9. Roumasset, James & Uy, Marilou, 1980. "Piece rates, time rates, and teams : Explaining patterns in the employment relation," Journal of Economic Behavior & Organization, Elsevier, vol. 1(4), pages 343-360, December.
    10. Reddy, C. R., 1985. "Rural labour market in varhad: a case study of agricultural labourers in rain-fed agriculture in India," ILO Working Papers 992418363402676, International Labour Organization.
    11. Petersen, Trond, 1991. "Reward Systems and the Distribution of Wages," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 7(0), pages 130-158, Special I.
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    Cited by:

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    2. Jayaraman, Rajshri & Lanjouw, Peter, 1999. "The Evolution of Poverty and Inequality in Indian Villages," The World Bank Research Observer, World Bank, vol. 14(1), pages 1-30, February.
    3. Jha, Raghbendra & Gaiha, Raghav & Pandey, Manoj K., 2013. "Body Mass Index, participation, duration of work and earnings under the National Rural Employment Guarantee Scheme: Evidence from Rajasthan," Journal of Asian Economics, Elsevier, vol. 26(C), pages 14-30.
    4. Omar Al‐Ubaydli & Steffen Andersen & Uri Gneezy & John A. List, 2015. "Carrots That Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes," Southern Economic Journal, John Wiley & Sons, vol. 81(3), pages 538-561, January.
    5. Hart, Robert A, 2001. "Hours and Wages in the Depression: British Engineering, 1926-1938," Explorations in Economic History, Elsevier, vol. 38(4), pages 478-502, October.
    6. Guiteras, Raymond P. & Jack, B. Kelsey, 2018. "Productivity in piece-rate labor markets: Evidence from rural Malawi," Journal of Development Economics, Elsevier, vol. 131(C), pages 42-61.
    7. Zenou, Yves & Jellal, Mohamed, 2005. "Ethnic Diversity, Market Structure and Risk Sharing in Developing Countries," CEPR Discussion Papers 5366, C.E.P.R. Discussion Papers.
    8. Makino, Momoe, 2012. "What motivates female operators to enter the garment industry in Pakistan in the post-MFA period?," IDE Discussion Papers 374, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    9. Ali Naqvi & Miriam Rehm, 2014. "A multi-agent model of a low income economy: simulating the distributional effects of natural disasters," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 9(2), pages 275-309, October.
    10. Raghav Gaiha, 2004. "Is There a Case for the Employment Guarantee Scheme in India? Some Recent Evidence," ASARC Working Papers 2004-09, The Australian National University, Australia South Asia Research Centre.
    11. Mamta Gurung & Sanchari Roy Mukherjee, 2018. "Gender, Women and Work in the Tea Plantation: A Case Study of Darjeeling Hills," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 61(3), pages 537-553, September.

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    More about this item

    Keywords

    India; labour contracts; agricultural labour;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets

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