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Segmentation of Rural Labour Contracts: Some Further Evidence

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  • Pal, Sarmistha

Abstract

The paper offers an explanation of labour tying commonly observed in seasonally agricultural economies. Employers may either hire regular labourers in the slack season to satisfy all or most of the labour demand in the high season but have underutilised labour in the low-demand season or rely on casual labourers only. Thus farmers hiring regular labour may also hire some casual labour as and when needed to minimise the hoarding costs of regular labour. Secondly, daily regular wages are usually lower than daily casual wages, but regular labourers usually get some wage-advance as well. Thus asset-poor workers have incentives to choose regular labour with interest-free wage advance because they face high marginal costs of credit in the segmented credit markets. The optimum hoarding costs decrease with increase in farm size, but increase with increase in spot market wages. However with improved availability of alternative employment opportunities and/or cheaper credit facilities to the asset-poor labourers, the supply of regular labour is likely to decline. Empirical evidence from the ICRISAT villages in south India seems to be consistent with the primary propositions of the model. Copyright 2002 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Suggested Citation

  • Pal, Sarmistha, 2002. "Segmentation of Rural Labour Contracts: Some Further Evidence," Bulletin of Economic Research, Wiley Blackwell, vol. 54(2), pages 151-180, April.
    • Handle: RePEc:bla:buecrs:v:54:y:2002:i:2:p:151-80
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    Cited by:

    1. Aurélie Darpeix & Céline Bignebat & Philippe Perrier-Cornet, 2014. "Demand for Seasonal Wage Labour in Agriculture: What Does Family Farming Hide?," Journal of Agricultural Economics, Wiley Blackwell, vol. 65(1), pages 257-272, January.
    2. Mishra, SK & Lyngskor, JW, 2003. "Real Wages of Casual Labourers in Shillong (India)," MPRA Paper 1810, University Library of Munich, Germany.
    3. Arnab Basu, 2013. "Impact of rural employment guarantee schemes on seasonal labor markets: optimum compensation and workers’ welfare," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(1), pages 1-34, March.
    4. Gathungu, E. & Musyoka, M.P., 2008. "Rural Household Labour Demand, Contract Choice, Hoarding Cost and Poverty: Evidence from Western Kenya," 2007 Second International Conference, August 20-22, 2007, Accra, Ghana 52159, African Association of Agricultural Economists (AAAE).

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