Food prices, wages, and welfare in rural India

Hanan Jacoby

No 6412, Policy Research Working Paper Series from The World Bank

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.

Keywords: Markets and Market Access; Economic Theory&Research; Labor Policies; Agribusiness; Emerging Markets (search for similar items in EconPapers)
Date: 2013-04-01
New Economics Papers: this item is included in nep-agr and nep-dev
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Citations: View citations in EconPapers (25)

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Related works:
Journal Article: FOOD PRICES, WAGES, AND WELFARE IN RURAL INDIA (2016)
Working Paper: Food Prices, Wages, and Welfare in Rural India (2013)
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