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Wages in Kind and Economic Development: Historical and Contemporary Evidence from Asia

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  • Kurosaki, Takashi
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    Abstract

    This paper investigates the function of various modes of wage payment, focusing on the role of in-kind wages in enhancing household food security when markets are underdeveloped. Historical records from Asian countries, including pre-war Japan and colonial India, demonstrate the importance of in-kind wage payment in the initial phase of economic development. However, there is a paucity of theoretical explanations of in-kind wages in terms of their function and rationale in existing literature. This paper therefore develops a theoretical model that explains labor supply under different labor contracts, by incorporating considerations of food security as the main explanation for in-kind wages. The model predicts that when food security considerations are important for workers, owing to poverty and thin food markets, they tend to work more under contracts where wages are paid in kind (food) than under contracts where wages are paid in cash. This prediction is supported by empirical evidence from rural Myanmar. Estimation results of the reduced-form determinants of labor supply show that workers supply more labor for work paid in kind when the share of staple food in the workers’ household budget is higher and the farmlands on which they produce food themselves are smaller.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/19422/1/No11-dp_10_011.pdf
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    Bibliographic Info

    Paper provided by Institute of Economic Research, Hitotsubashi University in its series PRIMCED Discussion Paper Series with number 11.

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    Length: 39 p.
    Date of creation: Mar 2011
    Date of revision:
    Handle: RePEc:hit:primdp:11

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    Keywords: agrarian contract; in-kind wages; incentive; food security; Myanmar;

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    1. Allen, Robert C. & Bengtsson, Tommy & Dribe, Martin (ed.), 2005. "Living Standards in the Past: New Perspectives on Well-Being in Asia and Europe," OUP Catalogue, Oxford University Press, number 9780199280681, October.
    2. Nobuhiko FUWA & Seiro ITO & Kensuke KUBO & Takashi KUROSAKI & Yasuyuki SAWADA, 2006. "Introduction To A Study Of Intrahousehold Resource Allocation And Gender Discrimination In Rural Andhra Pradesh, India," The Developing Economies, Institute of Developing Economies, vol. 44(4), pages 375-397.
    3. Takahiro Ito & Takashi Kurosaki, 2007. "Weather Risk, Wages in Kind, and the Off-Farm Labor Supply of Agricultural Households in a Developing Country," Hi-Stat Discussion Paper Series d07-226, Institute of Economic Research, Hitotsubashi University.
    4. Takashi Kurosaki & Marcel Fafchamps, 1997. "Insurance Market Efficiency and Crop Choices in Pakistan," Working Papers 97010, Stanford University, Department of Economics.
    5. 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.
    6. Nigel Key & Elisabeth Sadoulet & Alain De Janvry, 2000. "Transactions Costs and Agricultural Household Supply Response," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(2), pages 245-259.
    7. Ligon, Ethan & Thomas, Jonathan P & Worrall, Tim, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 209-44, January.
    8. Takashi Kurosaki & Ikuko Okamoto & Kyosuke Kurita & Koichi Fujita, 2004. "Rich Periphery, Poor Center: Myanmar's Rural Economy under Partial Transition to a Market Economy," Hi-Stat Discussion Paper Series d03-23, Institute of Economic Research, Hitotsubashi University.
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