Daily wages and piece rates in agrarian economies

Jean-Marie Baland, Jean Dreze and Luc Leruth ()
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Jean Dreze: STICERD, LSE and Delhi School of Economics
Luc Leruth: Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve and Department of Business Administration, University of Liège, Belgium

No 1998058, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: The paper presents an analysis of the coexistence of daily-wage and piece-rate contracts in agrarian economies. We show that, when individual effort is taken into account, daily-wage labourers typically form a convex set in the space of working ability. The most able and the least able labourers work on piece rates, as they can thus choose their own level of effort. We also prove that, on a monopsonistic labour market, the use of both contracts in equilibrium results from the profitability of market segmentation. Imperfect substitutability between workers under different contracts and the downwards rigidity of daily wages can also explain the coexistence of the two types of contracts in more general settings, e.g. perfect competition

Keywords: India; labour contracts; agricultural labour (search for similar items in EconPapers)
JEL-codes: J41 J43 (search for similar items in EconPapers)
Date: 1998-10-01
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Journal Article: Daily wages and piece rates in agrarian economies (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1998058

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