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Daily wages and piece rates in agrarian economies

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Author Info

  • 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

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1998058.

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Date of creation: 01 Oct 1998
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Handle: RePEc:cor:louvco:1998058

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Keywords: India; labour contracts; agricultural labour;

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References

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  1. Matutes, Carmen & Regibeau, Pierre & Rockett, Katharine, 1994. "Compensation Schemes and Labor Market Competition: Piece Rate versus Wage Rate," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(2), pages 325-53, Summer.
  2. Bliss, C. J. & Stern, N. H., 1982. "Palanpur: The Economy of an Indian Village," OUP Catalogue, Oxford University Press, number 9780198284192.
  3. Reddy, C. R, 1985. "Rural labour market in varhad: a case study of agricultural labourers in rain-fed agriculture in India," ILO Working Papers 241836, International Labour Organization.
  4. Anindita Mukherjee, 1994. "The Labour Markets in Indian Villages," Boston University - Institute for Economic Development 34, Boston University, Institute for Economic Development.
  5. 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.
  6. Petersen, Trond, 1991. "Reward Systems and the Distribution of Wages," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(0), pages 130-58, Special I.
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Citations

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Cited by:
  1. 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.
  2. Imai, Katsushi, 2007. "Targeting versus universalism: An evaluation of indirect effects of the Employment Guarantee Scheme in India," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 99-113.
  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. Jayraman, Raji & Lanjouw, Peter, 1998. "The evolution of poverty and inequality in Indian villages," Policy Research Working Paper Series 1870, The World Bank.
  5. Omar Al-Ubaydli & Steffen Andersen & Uri Gneezy & John A. List, 2012. "Carrots that Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes," NBER Working Papers 18453, National Bureau of Economic Research, Inc.
  6. 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).
  7. Jellal, Mohamed & Zenou, Yves, 2006. "Ethnic diversity market structure and risk sharing in developing countries," MPRA Paper 38435, University Library of Munich, Germany.
  8. 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.

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