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Contractual Mix Between Cash and Kind Wages of Casual Workers in an Agrarian Economy

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  • Samar K. Datta
  • Jeffrey B. Nugent
  • Asher Tishler

Abstract

A two‐agent general‐equilibrium model is developed for explaining the mix of wage payment between cash and kind among landowners and workers. Its focus is on how, in the absence of insurance instruments but in the presence of heterogeneous tastes and attitudes toward risk among agents, the payment mix between cash and kind can serve as a welfare‐improving, risk‐hedging device. The model is used to determine how this optimal mix of wage payment would be affected by changes in risk‐aversion, consumption preferences, technology, price risk, and production risk. While the complexity and nonlinearity of the model make it impossible to obtain clear‐cut analytical results, simulation results are derived and shown to be rather robust. These results are also broadly supported by the findings of a small‐scale survey of agricultural wage contracts in India.

Suggested Citation

  • Samar K. Datta & Jeffrey B. Nugent & Asher Tishler, 2004. "Contractual Mix Between Cash and Kind Wages of Casual Workers in an Agrarian Economy," Review of Development Economics, Wiley Blackwell, vol. 8(4), pages 521-540, November.
    • Handle: RePEc:bla:rdevec:v:8:y:2004:i:4:p:521-540
    DOI: 10.1111/j.1467-9361.2004.00250.x
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    References listed on IDEAS

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    1. Pranab K. Bardhan, 1983. "Labor-tying in a Poor Agrarian Economy: A Theoretical and Empirical Analysis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(3), pages 501-514.
    2. Helpman, Elhanan & Razin, Assaf, 1979. "A Theory of International Trade Under Uncertainty," Elsevier Monographs, Elsevier, edition 1, number 9780123396501 edited by Shell, Karl.
    3. Yujiro Hayami & Keijiro Otsuka & K. Subbarao, 1982. "Efficiency and Equity in the Producer Levy of India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(4), pages 655-663.
    4. Bliss, C. J. & Stern, N. H., 1982. "Palanpur: The Economy of an Indian Village," OUP Catalogue, Oxford University Press, number 9780198284192.
    5. Bhaduri, Amit, 1977. "On the Formation of Usurious Interest Rates in Backward Agriculture," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 1(4), pages 341-352, December.
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