IDEAS home Printed from https://ideas.repec.org/h/fpr/ifpric/9789845063715_10.html
   My bibliography  Save this book chapter

Escalation of real wages in Bangladesh: Is it the beginning of structural transformation?

In: Securing food for all in Bangladesh

Author

Listed:
  • Zhang, Xiaobo
  • Rashid, Shahidur
  • Kaikaus, Ahmad
  • Ahmed, Akhter

Abstract

With about 1,200 people per square kilometer, Bangladesh is one the most densely populated countries on the planet. The reality of intense population pressure is reflected in commonly portrayed images in the popular media, such as crowded buses and trains with passengers on top, endless lines of human-powered rickshaws, and deaths in the thousands from both natural and man-made disasters. With increasing landlessness, and a heavy reliance on labor markets, understanding the dynamics of wage formation in this setting is critically important for identifying the process of economic transformation and poverty reduction. However, both theories and empirics of wage determination in Bangladesh, and elsewhere in developing countries, have intrigued economists for decades. The neoclassical theories, where labor demand and wages are determined by the marginal physical product, cannot explain stable wages amid seemingly unlimited supply of workers and massive involuntary unemployment in developing countries like Bangladesh. The reason is simple: if market clearing conditions hold, unemployed workers should bid down wages until full employment as reached. One set of theories that provide a more coherent explanation of stable wages amid abundant labor supply has been the nutrition-based efficiency wage theory, originally proposed by Leibenstein (1957) and Mazumdar (1959). The premise of this theory is that since productivity depends on consumption, it is in the interest of the employers to pay a wage that ensures minimum calorie requirement of the workers so that they can work effectively.

Suggested Citation

  • Zhang, Xiaobo & Rashid, Shahidur & Kaikaus, Ahmad & Ahmed, Akhter, 2021. "Escalation of real wages in Bangladesh: Is it the beginning of structural transformation?," IFPRI book chapters, in: Securing food for all in Bangladesh, chapter 10, pages 343-374, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:ifpric:9789845063715_10
    as

    Download full text from publisher

    File URL: https://www.ifpri.org/cdmref/p15738coll2/id/134711/filename/134920.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zhang, Xiaobo & Yang, Jin & Wang, Shenglin, 2011. "China has reached the Lewis turning point," China Economic Review, Elsevier, vol. 22(4), pages 542-554.
    2. World Bank, 2013. "Bangladesh - Poverty Assessment : Assessing a Decade of Progress in Reducing Poverty, 2000-2010," World Bank Publications - Reports 16622, The World Bank Group.
    3. Bardhan, Pranab K, 1979. "Wages and Unemployment in a Poor Agrarian Economy: A Theoretical and Empirical Analysis," Journal of Political Economy, University of Chicago Press, vol. 87(3), pages 479-500, June.
    4. Gustav Ranis, 2012. "Labor Surplus Revisited," Working Papers 1016, Economic Growth Center, Yale University.
    5. Rossitza B. Wooster & David S. Diebel, 2010. "Productivity Spillovers from Foreign Direct Investment in Developing Countries: A Meta‐Regression Analysis," Review of Development Economics, Wiley Blackwell, vol. 14(3), pages 640-655, August.
    6. Nguyen Viet Cuong & Daniel Mont, 2012. "Economic impacts of international migration and remittances on household welfare in Vietnam," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 11(2), pages 144-163, June.
    7. 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).
    8. Justin Yifu Lin, 2012. "New Structural Economics : A Framework for Rethinking Development and Policy," World Bank Publications - Books, The World Bank Group, number 2232.
    9. Ranis, Gustav, 2012. "Labor Surplus Revisited," Center Discussion Papers 133411, Yale University, Economic Growth Center.
    10. Khandker, Shahidur R. & Samad, Hussain & Ali, Rubaba, 2013. "Does Access to Finance Matter in Microenterprise Growth? Evidence from Bangladesh," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149028, Agricultural and Applied Economics Association.
    11. Dorosh, Paul A. & Rashid, Shahidur, 2013. "Trade subsidies, export bans and price stabilization: Lessons of Bangladesh–India rice trade in the 2000s," Food Policy, Elsevier, vol. 41(C), pages 103-111.
    12. Rashid, Shahidur, 2002. "Dynamics of agricultural wage and rice price in Bangladesh," MSSD discussion papers 44, International Food Policy Research Institute (IFPRI).
    13. Jean Olson Lanjouw & Peter Lanjouw, 2001. "How to Compare Apples And Oranges: Poverty Measurement Based on Different Definitions of Consumption," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(1), pages 25-42, March.
    14. Gary S. Fields, 2004. "Dualism In The Labor Market: A Perspective On The Lewis Model After Half A Century," Manchester School, University of Manchester, vol. 72(6), pages 724-735, December.
    15. 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.
    16. Mark R. Rosenzweig, 1980. "Neoclassical Theory and the Optimizing Peasant: An Econometric Analysis of Market Family Labor Supply in a Developing Country," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(1), pages 31-55.
    17. Dipak Mazumdar, 1959. "The Marginal Productivity Theory of Wages and Disguised Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 26(3), pages 190-197.
    18. repec:bla:rdevec:v:14:y:2010:i:s1:p:640-655 is not listed on IDEAS
    19. World Bank, 2012. "World Development Indicators 2012," World Bank Publications - Books, The World Bank Group, number 6014.
    20. Xiaobo Zhang & Kevin Zhang, 2003. "How Does Globalisation Affect Regional Inequality within A Developing Country? Evidence from China," Journal of Development Studies, Taylor & Francis Journals, vol. 39(4), pages 47-67.
    21. Swadesh R. Bose, 1968. "Trend of Real Income of the Rural Poor in East Pakistan, 1949-66," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 8(3), pages 452-488.
    22. Ahmed, Iqbal, 1981. "Wage Determination in Bangladesh Agriculture," Oxford Economic Papers, Oxford University Press, vol. 33(2), pages 298-322, July.
    23. Mahabub Hossain & Firdousi Naher & Quazi Shahabuddin, 2005. "Food Security and Nutrition in Bangladesh: Progress and Determinants," The Electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization of the United Nations, vol. 2(2), pages 103-132.
    24. 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.
    25. World Bank, 2008. "Bangladesh - Poverty Assessment for Bangladesh : Creating Opportunities and Bridging the East-West Divide," World Bank Publications - Reports 6144, The World Bank Group.
    26. World Bank, 2008. "Poverty Assessment for Bangladesh," World Bank Publications - Reports 28239, The World Bank Group.
    27. World Bank, 2008. "Bangladesh - Poverty Assessment for Bangladesh : Creating Opportunities and Bridging the East-West Divide," World Bank Publications - Reports 7886, The World Bank Group.
    28. S. R. Bose, 1968. "Trend of Real Income of the Rural Poor in East Pakistan, 1949-66 -- An Indirect Estimate," PIDE-Working Papers 1968:068, Pakistan Institute of Development Economics.
    29. repec:pri:rpdevs:deaton_prices_poverty_india is not listed on IDEAS
    30. Ranis, Gustav, 2012. "Labor Surplus Revisited," Working Papers 107, Yale University, Department of Economics.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Ishwor Adhikari, 2022. "The conundrum of labour shortage in a labour surplus economy: an investigation of Nepal," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 24(2), pages 404-435, December.
    3. Shadlee Rahman, 2018. "A Critical Examination of Inter-temporal Spatial Poverty Trends in Bangladesh," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 19(1), pages 108-123, March.
    4. Maren Duvendack & Richard Palmer-Jones, 2017. "Micro-Finance, Women’s Empowerment and Fertility Decline in Bangladesh: How Important Was Women’s Agency?," Journal of Development Studies, Taylor & Francis Journals, vol. 53(5), pages 664-683, May.
    5. 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.
    6. Berg Claudia & Emran M. Shahe, 2020. "Microfinance and Vulnerability to Seasonal Famine in a Rural Economy: Evidence from Monga in Bangladesh," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(3), pages 1-36, July.
    7. Peter Davis & Bob Baulch, 2010. "Casting the net wide and deep: lessons learned in a mixed-methods study of poverty dynamics in rural Bangladesh," Working Papers id:2674, eSocialSciences.
    8. Asadullah, M. Niaz & Savoia, Antonio & Mahmud, Wahiduddin, 2014. "Paths to Development: Is there a Bangladesh Surprise?," World Development, Elsevier, vol. 62(C), pages 138-154.
    9. Briones, Roehlano & Felipe, Jesus, 2013. "Agriculture and Structural Transformation in Developing Asia: Review and Outlook," ADB Economics Working Paper Series 363, Asian Development Bank.
    10. Hassan, Md. Fuad & Kornher, Lukas, 2020. "Is mechanization in agriculture curse or blessing for the rural labor market in Bangladesh?," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304543, Agricultural and Applied Economics Association.
    11. Subir Bairagi & Muntaseer Kamal, 2019. "Is Bangladesh’s Economy Approaching the Lewis Turning Point?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 20(1), pages 19-45, March.
    12. repec:eee:labchp:v:3:y:1999:i:pb:p:2859-2939 is not listed on IDEAS
    13. A. T. M. Hasibul Islam & Syed Abul Basher & A. K. Enamul Haque, 2022. "The impact of mobile money on long-term poverty: evidence from Bangladesh," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 24(2), pages 436-455, December.
    14. Md. Fuad Hassan & Lukas Kornher, 2022. "Farm wage and Rice Price dynamics in Bangladesh," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 14(1), pages 127-146, February.
    15. José Roche, 2013. "Monitoring Progress in Child Poverty Reduction: Methodological Insights and Illustration to the Case Study of Bangladesh," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 112(2), pages 363-390, June.
    16. Lavopa, A., 2014. "Catching up and lagging behind in a balance-of-payments-constrained dual economy," MERIT Working Papers 2014-042, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    17. Dessing, Maryke, 2004. "Implications for minimum-wage policies of an S-shaped labor-supply curve," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 543-568, April.
    18. Sushenjit Bandyopadhyay & Emmanuel Skoufias, 2015. "Rainfall variability, occupational choice, and welfare in rural Bangladesh," Review of Economics of the Household, Springer, vol. 13(3), pages 589-634, September.
    19. Abu Sarker & Mohammad Rahman, 2015. "The Role of Social Accountability in Poverty Alleviation Programs in Developing Countries: An Analysis with Reference to Bangladesh," Public Organization Review, Springer, vol. 15(2), pages 317-333, June.
    20. Marianna Battaglia & Selim Gulesci & Andreas Madestam, 2024. "Repayment Flexibility and Risk Taking: Experimental Evidence from Credit Contracts," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 91(5), pages 2635-2675.
    21. Banerjee, Lopamudra, 2007. "Effect of Flood on Agricultural Wages in Bangladesh: An Empirical Analysis," World Development, Elsevier, vol. 35(11), pages 1989-2009, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fpr:ifpric:9789845063715_10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/ifprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.