Publication: Food Prices, Wages, and Welfare in Rural India
Date
2013-04
ISSN
Published
2013-04
Author(s)
Jacoby, Hanan G.
Abstract
This paper considers the welfare and
distributional consequences of higher relative food prices
in rural India through the lens of a specific-factors,
general equilibrium, trade model applied at the district
level. The evidence shows that nominal wages for manual
labor both within and outside agriculture respond
elastically to increases in producer prices; that is, wages
rose faster in rural districts growing more of those crops
with large price run-ups over 2004-09. Accounting for such
wage gains, the analysis finds that rural households across
the income spectrum benefit from higher agricultural
commodity prices. Indeed, rural wage adjustment appears to
play a much greater role in protecting the welfare of the
poor than the Public Distribution System, India's giant
food-rationing scheme. Moreover, policies, like agricultural
export bans, which insulate producers (as well as consumers)
from international price increases, are particularly harmful
to the poor of rural India. Conventional welfare analyses
that assume fixed wages and focus on households' net
sales position lead to radically different conclusions.
Citation
“Jacoby, Hanan G.. 2013. Food Prices, Wages, and Welfare in Rural India. Policy Research Working Paper;No.6412. © World Bank, Washington, D.C.. http://hdl.handle.net/10986/14451 License: CC BY 3.0 IGO.”
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