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The Agricultural Wage Gap Within Rural Villages

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  • Baysan, Ceren
  • Emerick, Kyle
  • Sadoulet, Elisabeth
  • Li, Zhimin
  • Dar, Manzoor

Abstract

We use unique data on daily labor-market outcomes for Indian casual workers to study labor reallocation between agricultural and non-agricultural activities within rural areas. Controlling for both individual time-invariant attributes and time-varying shocks, we find that workers who switch sectors across years or even within a week can obtain 23% higher wages by taking non-agricultural jobs. The evidence suggests that compensating differentials rather than sorting on ability are important in explaining the wage gap. We then estimate a discrete choice model of daily labor supply that decomposes preferences for jobs into spatial frictions associated with location and sectoral frictions associated with attributes of jobs. We find that while spatial frictions are significant even within rural areas, sectoral frictions are nearly the same in magnitude and have implications for smoothing shocks. Counterfactual analysis shows that the unemployment effect of a one standard deviation decrease in rainfall would be halved in the absence of sectoral frictions.

Suggested Citation

  • Baysan, Ceren & Emerick, Kyle & Sadoulet, Elisabeth & Li, Zhimin & Dar, Manzoor, 2022. "The Agricultural Wage Gap Within Rural Villages," CEPR Discussion Papers 17547, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:17547
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    2. Faieta, Elena & Feng, Zhexin & Serafinelli, Michel, 2025. "Rural Employment Evolutions," IZA Discussion Papers 17715, IZA Network @ LISER.
    3. Shadab Hashmi, 2025. "Impact of Rural Non-Farm Employment on Income and Poverty Alleviation in Uttar Pradesh: A Propensity Score Matching Analysis," SAGE Open, , vol. 15(4), pages 21582440251, November.
    4. Zhijie Song & Shaopeng Zhang, 2025. "Regional Cooperation and the Urban–Rural Income Inequality: Evidence from China’s East–West Cooperation Program," Sustainability, MDPI, vol. 17(20), pages 1-25, October.
    5. Delavallade, Clara & Gittard, Melanie Colette Jacqueline & Vaillant, Julia, 2025. "Women and Climate Adaptation in Rural Sub-Saharan Africa : Constraints and Research Priorities," Policy Research Working Paper Series 11095, The World Bank.
    6. Gwee, Yi Jie, 2025. "Seeds of Change : The Effects of the Introduction of Bt Cotton in India," Policy Research Working Paper Series 11275, The World Bank.
    7. Imbert, Clément & Papp, John, 2020. "Costs and benefits of rural-urban migration: Evidence from India," Journal of Development Economics, Elsevier, vol. 146(C).
    8. Elena Faieta & Zhexin Feng & Michel Serafinelli, 2025. "Rural Employment Evolutions," CESifo Working Paper Series 11699, CESifo.
    9. Sarthak Joshi, 2025. "Spatial Shocks and Gender Employment Gaps," Edinburgh School of Economics Discussion Paper Series 323, Edinburgh School of Economics, University of Edinburgh.

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