Rural Wages, Labor Supply, and Land Reform: A Theoretical and Empirical Analysis
Year: 2016
Type: article
Abstract: Land reform is one of the most mentioned of the theoretical policy instruments discussed in the development literature, yet relatively little attention has been paid to the wage rate consequences of such a program, despite the fact that perhaps more than one-half of rural families in a developing country receive a substantial proportion of their income from wage earnings in agriculture.' One reason for this lacuna may be that the determination of wages and family labor supply in the agricultural sector of LDCs has also been somewhat neglected, particularly in the context of a heterogeneous labor force.2 The subsistence or institutional wage models of W. Arthur Lewis, John Fei and Gustav Ranis, and Gerald Rodgers, for instance, offer no theory of how rural wage levels or differentials are set and thus provide little guidance on how wage rates would be affected by changes in land ownership patterns. More recently, Pranab Bardhan and T. N. Srinivasan, David Newbery, and Clive Bell and Pinhas Zusman, who formulate general equilibrium market or bargaining models determining endogenously the rental share paid by tenant sharecroppers, have assumed that agricultural wage rates are exogenous or determined only by nonagricultural factors. All of these models assume that rural labor is homogeneous. Another reason why the potential wage impact of a land reform program may have received little attention is that models of peasant family behavior, such as those of A. K. Sen, Dipak Mazumdar, and Robert Mabro, typically embody two restrictive assumptions which would tend to make the equalization of landholdings appear wage augmenting, although this implication has never been formally derived. These assumptions are that 1) agriculture is dualistic, with small-farm families facing lower shadow prices of labor (leisure) than large-farm landlords because of impediments to labor mobility and 2) agricultural households are dichotomoussmall farmers employ family labor and maximize utility while farms only utilize wage labor and maximize profits. Data from a 1970-71 allIndia survey of over 5,000 households collected by the National Council of Applied Economic Research3 indicate, however, that almost all cultivator households. large and small, participate actively in the labor market as either buyers or sellers of labor services, with almost 88 percent of households cultivating a gross-cropped area less than 1.5 acres utilizing some hired labor. Seventynine percent of these small farm households *Associate professor, Yale UJniversity. The research embodied in this paper was supported in part by a grant from the Ford and Rockefeller Foundations' Program in Support of Social Science and Legal Research on Population Policy and with funds from the U.S. Agency for International Development under Order No. AID/otr-1432. Helpful suggestions and comments were provided by James L. McCabe, Mark Gersovitz, an anonymous referee, the managing editor, and members of the Economic Growth Center, Yale University. I am also grateful to the members of the Research Program in Development Studies, Princeton University, for the use of their facilities. Research assistance was provided by James Devine, Anne Morgan, and Roberta Robson. INotable exceptions are R. Albert Berry, Mark Gersovitz, and M. A. Rahman. All of these authors, however, employ geometric analyses with differing assumptions leading to wholly different predictions regarding wage effects. None consider the heterogeneity of agricultural labor, pay attention to questions of stability, or attempt to apply their models to data. 2lnformation on the differential impact of alternative agricultural policies, including land reform, on sex or age-specific wage rates is not only important in settling income distribution and equity issues but, as suggested in an article by the author and Robert Evenson, may have significant implications for population growth and schooling as well. 3For a more detailed discussion of these data, see the author.
Source: American Economic Review
Author: Mark R. Rosenzweig
Language: English
Topic: Land Rights and Reforms
Subfield: Soil Science
Domain: Life Sciences
Open Access status: green
OpenAlex ID: W1529853722