Timeliness of Farming Operations as a Determinant of Equilibrium Wages with Excess Labor Supply: A Strategic Bargaining Approach

Amresh Hanchate

Review of Development Economics, 2000, vol. 4, issue 1, 51-69

Abstract: Data from predominantly rural economies show that, despite persistent involuntary unemployment, wages have been rising. However, the theoretical literature offers a scenario of largely rigid wages. This paper proposes a theory of strategic bargaining between individual laborers and farmers based on a characteric of production that is unique to farming, namely, sensitivity of output to timeliness of farmwork. The key argument is that despite risk of unemployment and threat of wage undercutting by those unemployed, a laborer in a competitive market setting can credibly threaten to refuse “low‐wage” offers and impose some of the cost of delay on farmers.

Date: 2000
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