Wages, Prices, and Agriculture: How Can Indian Agriculture Cope with Rising Wages?
28 Pages Posted: 19 Jun 2015 Last revised: 22 Jul 2015
Date Written: June 17, 2015
In this paper we study the impact of rising wages on Indian agriculture by measuring the responses to output prices and wages of output, and of both variable and quasi fixed factors. Raising output prices to compensate for rising wages is an unattractive policy, because the medium-term elasticity of crop output with respect to wages was larger than the elasticity of crop output with respect to crop prices (-0.36 versus 0.27). Instead, the growth of non-land assets and education were more powerful drivers of output growth, and these factors easily compensated for rising wages during 1999-2007. However, the much higher wage growth that followed would have been challenging to manage.
Keywords: Crop Supply, India, Labor demand, Prices, Wages
JEL Classification: Q1, Q11, Q12, Q13, Q15, Q18
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