Wages in Kind and Economic Development: Historical and Contemporary Evidence from Asia
AbstractThis 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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Bibliographic InfoPaper provided by Institute of Economic Research, Hitotsubashi University in its series PRIMCED Discussion Paper Series with number 11.
Length: 39 p.
Date of creation: Mar 2011
Date of revision:
agrarian contract; in-kind wages; incentive; food security; Myanmar;
Find related papers by JEL classification:
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-07 (All new papers)
- NEP-DEV-2011-11-07 (Development)
- NEP-LAB-2011-11-07 (Labour Economics)
- NEP-SEA-2011-11-07 (South East Asia)
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