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Rural Wage Dynamics in India: What Role does Inflation Play?

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  • Sujata Kundu

Abstract

This paper studies the relationship between rural wage growth and inflation in India to assess the risk of a wage - price spiral to the inflation trajectory. The results of a cointegration and Vector Error Correc tion Model (VECM) show that in the long - run both nominal agricultural wages and non - agricultural wages exhibit statistically significant positive relationship with rural prices. Findings of a dynamic panel data model using Arellano - Bover/Blundell - Bond syst em of generalized method of moments (GMM) structure show that during November 2013 - November 2017, changes in rural prices had a positive and significant impact on changes in nominal wages, controlling for other determinants such as non - agricultural wages, Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) wages and rainfall departure from normal. The results also point to significant stickiness in nominal wages and the presence of a statistically significant positive impact of non - farm (con struction sector) wages on agricultural wages. This paper does not find any robust empirical support for the risk of a wage - price spiral in India during the period of study.

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  • Sujata Kundu, 2018. "Rural Wage Dynamics in India: What Role does Inflation Play?," Working Papers id:12774, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:12774
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    Citations

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    Cited by:

    1. SJ, Balaji & Pal, Suresh, 2021. "Agricultural Productivity, Pay-Gap, and Non-Farm Development: Contribution to Structural Transformation in India," 2021 Conference, August 17-31, 2021, Virtual 315213, International Association of Agricultural Economists.
    2. Sitikantha Pattanaik & Silu Muduli & Soumyajit Ray, 2020. "Inflation expectations of households: do they influence wage-price dynamics in India?," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 13(3), pages 244-263, September.
    3. Koblianska, Inna & Seheda, Serhii & Khaietska, Olha & Kalachevska, Larysa & Klochko, Tetiana, 2022. "Determinants of potato producer prices in the peasant-driven market: the Ukrainian case," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 8(3), June.
    4. Ishan Anand & Anjana Thampi, 2021. "The Crisis of Extreme Inequality in India," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 64(3), pages 663-683, September.
    5. Sthanu R. Nair, 2019. "India’s Agrarian Performance: A Comparative Analysis of UPA and NDA Regimes," Working papers 340, Indian Institute of Management Kozhikode.
    6. Diego Maiorano, 2019. "The 2019 Indian Elections and the Ruralization of the BJP," Studies in Indian Politics, , vol. 7(2), pages 176-190, December.

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