Labor-tying in a Poor Agrarian Economy: A Theoretical and Empirical Analysis

Pranab Bardhan

The Quarterly Journal of Economics, 1983, vol. 98, issue 3, 501-514

Abstract: In this paper we show how tied labor, contrary to its common characterization as a feudal relic and as a symptom of economic stagnation, may actually be strengthened by capitalist agricultural development. We construct a simple two-period theoretical model of a two-tiered labor market to show how the proportional importance of voluntary labor-tying contracts may increase with yield-increasing improvements and with a tightening of the labor market. We then provide in support of these hypotheses some general historical as well as more detailed econometric evidence from a variety of cross-sectional data in rural India.

Date: 1983
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