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A Dynamic Econometric Model of Agricultural Wage Determination in Bangladesh

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  • Boyce, James K
  • Ravallion, Martin

Abstract

Econometric evidence on the evolution of real agricultural wages in Bangladesh over time has been used by some observers to argue that higher relative prices of food staples and higher agricultural productivity will help the rural poor. The authors re-examine this hypothesis using new data and a dynamic econometric model of wage determination. The model's specification avoids a number of shortcomings in past work, and the estimated equation gives a good yet parsimonious fit to annual data. Increases in rice prices relative to the prices of manufactured goods are found to have adverse effects on the real wages in terms of rice in both the short and long-run though there is full indexation relative to a bundle of goods in the long-run. On correcting for likely measurement errors in the official series, they find no evidence that changes in agricultural productivity have had a significant effect on real wage rates. Copyright 1991 by Blackwell Publishing Ltd

Suggested Citation

  • Boyce, James K & Ravallion, Martin, 1991. "A Dynamic Econometric Model of Agricultural Wage Determination in Bangladesh," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(4), pages 361-376, November.
    • Handle: RePEc:bla:obuest:v:53:y:1991:i:4:p:361-76
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    References listed on IDEAS

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    1. Jonathan Thomas & Tim Worrall, 1988. "Self-Enforcing Wage Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 55(4), pages 541-554.
    2. Adrian R Pagan & Anthony D Hall, 1983. "Diagnostic tests as residual analysis," Published Paper Series 1983-1, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    3. Alain de Janvry & Elisabeth Sadoulet, 1987. "Agricultural Price Policy in General Equilibrium Models: Results and Comparisons," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(2), pages 230-246.
    4. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    5. Ahmed, Iqbal, 1981. "Wage Determination in Bangladesh Agriculture," Oxford Economic Papers, Oxford University Press, vol. 33(2), pages 298-322, July.
    6. Nickell, Stephen, 1985. "Error Correction, Partial Adjustment and All That: An Expository Note," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 47(2), pages 119-129, May.
    7. Ravallion, Martin, 1990. "Rural Welfare Effects of Food Price Changes under Induced Wage Responses: Theory and Evidence for Bangladesh," Oxford Economic Papers, Oxford University Press, vol. 42(3), pages 574-585, July.
    8. Ahmed, Raisuddin, 1981. "Agricultural price policies under complex socioeconomic and natural constraints: the case of Bangladesh," Research reports 27, International Food Policy Research Institute (IFPRI).
    9. Raaj Kumar Sah & Joseph E. Stiglitz, 1987. "Price Scissors and the Structure of the Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(1), pages 109-134.
    10. Ravallion, Martin, 1985. "The Performance of Rice Markets in Bangladesh during the 1974 Famine," Economic Journal, Royal Economic Society, vol. 95(377), pages 15-29, March.
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