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Information, Learning, and Wage Rates in Low-Income Rural Areas


  • Andrew D. Foster
  • Mark R. Rosenzweig


In this essay, we present evidence that employers in rural areas of developing countries have imperfect information with regard to the productivity of heterogeneous workers. In addition to obtaining direct measures of the completeness of employer information we consider the implications of information asymmetries for the structure of casual labor markets. We then evaluate the extent to which casual labor markets do, in fact, exhibit these attributes. We find that: (1) there is adverse selection out of the time-rate labor market; (2) employers discriminate statistically: given two workers with different observed characteristics but the same actual productivity, the worker from the group with the higher average productivity will have a higher wage; (3) employers exhibit learning over time: the extent of employer ignorance is negatively related to labor-market exposure on the part of the workers; and (4) calorie consumption affects productivity but is not rewarded in the time-rate labor market. In concluding we argue that an analysis of wage and employment patterns and the implications of these patterns for human capital investment in rural areas of developing countries that ignored the role of information problems could yield misleading conclusions.

Suggested Citation

  • Andrew D. Foster & Mark R. Rosenzweig, 1993. "Information, Learning, and Wage Rates in Low-Income Rural Areas," Journal of Human Resources, University of Wisconsin Press, vol. 28(4), pages 759-790.
  • Handle: RePEc:uwp:jhriss:v:28:y:1993:i:4:p:759-790

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    References listed on IDEAS

    1. Murphy, Kevin M & Topel, Robert H, 2002. "Estimation and Inference in Two-Step Econometric Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 88-97, January.
    2. Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, vol. 55(4), pages 765-799, July.
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    Cited by:

    1. Mohrenweiser, Jens & Wydra-Sommaggio, Gaby & Zwick, Thomas, 2014. "Adverse Selection and Information Advantages of Training Firms," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100525, Verein für Socialpolitik / German Economic Association.
    2. Paul Schultz, T., 2003. "Wage rentals for reproducible human capital: evidence from Ghana and the Ivory Coast," Economics & Human Biology, Elsevier, vol. 1(3), pages 331-366, December.
    3. Rizov, Marian, 2003. "Human Capital And The Agrarian Structure In Transition: Micro Evidence From Romania," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25823, International Association of Agricultural Economists.
    4. Dionne, Georges, 1998. "La mesure empirique des problèmes d’information," L'Actualité Economique, Société Canadienne de Science Economique, vol. 74(4), pages 585-606, décembre.
    5. Emran, M. Shahe & Shilpi, Forhad, 2014. "Land Market Restrictions, Women's Labor Force Participation and Wages," MPRA Paper 57989, University Library of Munich, Germany.
    6. Glewwe, Paul, 2001. "Schools, Skills And Economic Development: Education Policies, Student Learning And Socioeconomic Outcomes In Developing Countries," Bulletins 12969, University of Minnesota, Economic Development Center.
    7. David Neumark, 1998. "Labor Market Information and Wage Differentials by Race and Sex," NBER Working Papers 6573, National Bureau of Economic Research, Inc.
    8. Jonna P. Estudillo & JAgnes R. Quisumbing & JoKeijiro Otsuka, 2001. "Gender Differences in Land Inheritance and Schooling Investments in the Rural Philippines," Land Economics, University of Wisconsin Press, vol. 77(1), pages 130-143.
    9. Lanjouw, Jean Olson, 1999. "Information and the operation of markets: tests based on a general equilibrium model of land leasing in India," Journal of Development Economics, Elsevier, vol. 60(2), pages 497-527, December.
    10. Schultz, T. Paul, 1995. "Human Capital and Economic Development," 1994 Conference, August 22-29, 1994, Harare, Zimbabwe 183410, International Association of Agricultural Economists.
    11. Felipe Balmaceda, "undated". "Compensation Methods in Competitive Labor Markets," ILADES-Georgetown University Working Papers inv118, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
    12. Hellerstein, Judith K & Neumark, David & Troske, Kenneth R, 1999. "Wages, Productivity, and Worker Characteristics: Evidence from Plant-Level Production Functions and Wage Equations," Journal of Labor Economics, University of Chicago Press, vol. 17(3), pages 409-446, July.
    13. Fabian Lange, 2007. "The Speed of Employer Learning," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 1-35.
    14. Shing-Yi Wang, 2015. "Statistical Discrimination, Productivity, and the Height of Immigrants," ILR Review, Cornell University, ILR School, vol. 68(3), pages 529-557, May.
    15. repec:eee:labchp:v:3:y:1999:i:pb:p:2859-2939 is not listed on IDEAS
    16. Marcel Fafchamps & Agnes R. Quisumbing, 1999. "Human Capital, Productivity, and Labor Allocation in Rural Pakistan," Journal of Human Resources, University of Wisconsin Press, vol. 34(2), pages 369-406.
    17. Ranis, Gustav & Stewart, Frances & Ramirez, Alejandro, 2000. "Economic Growth and Human Development," World Development, Elsevier, vol. 28(2), pages 197-219, February.
    18. Schultz, T. Paul & Tansel, Aysit, 1997. "Wage and labor supply effects of illness in Cote d'Ivoire and Ghana: instrumental variable estimates for days disabled," Journal of Development Economics, Elsevier, vol. 53(2), pages 251-286, August.
    19. Rizov, Marian, 2005. "Pull and push: individual farming in Hungary," Food Policy, Elsevier, vol. 30(1), pages 43-62, February.
    20. Swamy, Anand V., 1997. "A simple test of the nutrition-based efficiency wage model," Journal of Development Economics, Elsevier, vol. 53(1), pages 85-98, June.
    21. Skoufias, Emmanuel, 1996. "Intertemporal substitution in labor supply: Micro evidence from rural India," Journal of Development Economics, Elsevier, vol. 51(2), pages 217-237, December.
    22. Galasso, Emanuela & Ravallion, Martin, 2005. "Decentralized targeting of an antipoverty program," Journal of Public Economics, Elsevier, vol. 89(4), pages 705-727, April.
    23. Rizov, Marian & Swinnen, Johan F.M., 2004. "Human capital, market imperfections, and labor reallocation in transition," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 745-774, December.
    24. Song Han, 2011. "Creditor Learning and Discrimination in Lending," Journal of Financial Services Research, Springer;Western Finance Association, vol. 40(1), pages 1-27, October.

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