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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," Review of Economic Studies, Oxford University Press, 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. Raaj Kumar Sah & Joseph E. Stiglitz, 1987. "Price Scissors and the Structure of the Economy," The Quarterly Journal of Economics, Oxford University Press, vol. 102(1), pages 109-134.
    9. 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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    Cited by:

    1. Santiago Garriga & María Ana Lugo & Jorge Puig, 2018. "Effects of Food Prices on Poverty: The Case of Paraguay, a Food Exporter and a Non-Fully Urbanized Country," CEDLAS, Working Papers 0231, CEDLAS, Universidad Nacional de La Plata.
    2. Brambilla, Irene & Porto, Guido, 2016. "Trade, Poverty Eradication, and the Sustainable Development Goals," ADBI Working Papers 629, Asian Development Bank Institute.
    3. Gaurav Datt & Martin Ravallion, 1998. "Farm productivity and rural poverty in India," Journal of Development Studies, Taylor & Francis Journals, vol. 34(4), pages 62-85.
    4. Wheatley, W. Parker & Liu, Donald J. & del Ninno, Carlo, 2001. "Empirical Analysis Of Hysteresis In Rural Labor Markets In A Developing Country: The Case Of Bangladesh," 2001 Annual meeting, August 5-8, Chicago, IL 20594, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Rashid, Shahidur & Tefera, Nigussie & Lemma, Solomon & Yunus, Mohammad, 2014. "Population pressure and livelihood dynamics: Panel evidence from Bangladesh," IFPRI discussion papers 1326, International Food Policy Research Institute (IFPRI).
    6. G. Jacoby , Hanan & Dasgupta, Basab, 2014. "Household Exposure to Food Price Shocks in Rural Bangladesh," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 37(1-2), pages 83-100, March-Jun.
    7. Ujjayant Chakravorty & Marie‐Hélène Hubert & Beyza Ural Marchand, 2019. "Food for fuel: The effect of the US biofuel mandate on poverty in India," Quantitative Economics, Econometric Society, vol. 10(3), pages 1153-1193, July.
    8. Banerjee, Lopamudra, 2007. "Effect of Flood on Agricultural Wages in Bangladesh: An Empirical Analysis," World Development, Elsevier, vol. 35(11), pages 1989-2009, November.
    9. Zhang, Xiaobo & Rashid, Shahidur & Ahmad, Kaikaus & Ahmed, Akhter, 2014. "Escalation of Real Wages in Bangladesh: Is it the Beginning of Structural Transformation?," World Development, Elsevier, vol. 64(C), pages 273-285.
    10. Akhand Akhtar Hossain, 2008. "Rural Labour Market Developments, Agricultural Productivity, and Real Wages in Bangladesh, 1950–2006," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(1), pages 89-114.
    11. Datt, Gaurav & Olmsted, Jennifer, 1998. "Agricultural wages and food prices in Egypt," FCND discussion papers 53, International Food Policy Research Institute (IFPRI).
    12. Derek D Headey, 2018. "Food Prices and Poverty," World Bank Economic Review, World Bank Group, vol. 32(3), pages 676-691.
    13. Nouve, Kofi & Wodon, Quentin, 2008. "Impact of rising rice prices and policy responses in Mali : simulations with a dynamic CGE model," Policy Research Working Paper Series 4739, The World Bank.
    14. Hanan G. Jacoby, 2016. "Food Prices, Wages, And Welfare In Rural India," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 159-176, January.
    15. Rashid, Shahidur, 2002. "Dynamics of agricultural wage and rice price in Bangladesh," MSSD discussion papers 44, International Food Policy Research Institute (IFPRI).
    16. Daniel Lederman & Guido Porto, 2016. "The Price Is Not Always Right: On the Impacts of Commodity Prices on Households (and Countries)," World Bank Research Observer, World Bank Group, vol. 31(1), pages 168-197.
    17. Sumiter Broca, 2002. "Food Insecurity, Poverty and Agriculture: A Concept Paper," Working Papers 02-15, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
    18. World Bank, 2010. "Food Price Increases in South Asia : National Responses and Regional Dimensions," World Bank Other Operational Studies 2885, The World Bank.
    19. Himanshu & Sujata Kundu, 2016. "Rural wages in India: Recent trends and determinants," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 59(2), pages 217-244, June.
    20. Hassan, F., 2018. "Farm Wage and Rice Price Dynamics in Bangladesh," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277415, International Association of Agricultural Economists.
    21. Taslim, M.A. & Taslim, Q.N., 2018. "Productivity and Agricultural Real Wage in Bangladesh: 1959-60 to 2012-13," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 41(01), pages 1-30, March.
    22. Richard Palmer‐Jones & Ashok Parikh, 1998. "The Determination of Agricultural Wage Rates in Bangladesh," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(1), pages 111-133, March.

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