Labor-tying and poverty in a rural economy:evidence from bangladesh

Selim Gulesci (selim.gulesci@gmail.com)

No 460, Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University

Abstract: I show that labor-tying (being in a labor contract where the employer also acts as an insurance-provider) is an important channel through which the poor in rural Bangladesh insure themselves against risks. Using a theoretical framework adapted from Bardhan (1983), I analyze the effects of an exogenous increase in the outside options of poor women (through an improvement in their self-employment opportunities) on their and their spouses' participation in tied labor, as well as the general equilibrium effects of the treatment on the terms of the labor contracts in the village. I find that treated women and their spouses are less likely to be in tied-labor contracts. Their wages increase through two channels: (a) due to the switch from tied to casual labor contracts (b) through the general equilibrium effects in the village labor market. Furthermore, I find that the treated households form reciprocal transfer links with wealthier households in the village. These findings imply that poor households may be involved in second-best labor contracts to insure themselves against risks. When their self-employment opportunities improve, they break these ties and move to greater reliance on reciprocal transfer arrangements. Keywords: tied labor, poverty, rural labor market. JEL Classification: J43; O12; I32.

Date: 2012
New Economics Papers: this item is included in nep-cwa, nep-dev and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://repec.unibocconi.it/igier/igi/wp/2012/460.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:igi:igierp:460

Ordering information: This working paper can be ordered from
https://repec.unibocconi.it/igier/igi/
igier@unibocconi.it

Access Statistics for this paper

More papers in Working Papers from IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University via Rontgen, 1 - 20136 Milano (Italy).
Bibliographic data for series maintained by (igier@unibocconi.it).