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 working ability. The most able and the least able labourers work on piece rates, as theu 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.
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Paper provided by Catholique de Louvain - Center for Operations Research and Economics in its series Papers with number
9858.
Length: 23 pages Date of creation: 1998 Date of revision: Handle: RePEc:fth:louvco:9858
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Find related papers by JEL classification: O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East 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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