Food Prices, Wages, and Welfare in Rural India

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.

Bibliographic Details

Main Author:	Jacoby, Hanan G.
Language:	English en_US
Published:	World Bank, Washington, D.C. 2013-04
Subjects:	ACCOUNTING, AGRICULTURAL COMMODITIES, AGRICULTURAL COMMODITY, AGRICULTURAL COSTS, AGRICULTURAL ECONOMICS, AGRICULTURAL EXPORT, AGRICULTURAL GOODS, AGRICULTURAL INPUTS, AGRICULTURAL MARKETS, AGRICULTURAL PRICE, AGRICULTURAL PRICES, AGRICULTURAL PRODUCT, AGRICULTURAL PRODUCTION, AGRICULTURAL SECTOR, AGRICULTURE, AVERAGE PRICE, AVERAGE PRICE CHANGE, BASE YEAR, COMMERCIAL POLICY, COMMODITY PRICE, COMMODITY PRICES, CONSTANT RETURNS TO SCALE, CONSUMER PRICES, CONSUMERS, CONSUMPTION EXPENDITURES, COTTON, CRISES, CROP PRODUCTION, CROPS, DEMAND FUNCTION, DEMOGRAPHIC, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DISCOUNT RATE, DISTRIBUTION OF INCOME, DOMESTIC MARKET, DOMESTIC MARKETS, DOMESTIC PRICE, ECONOMETRICS, ECONOMIC THEORY, ELASTICITY, ENGEL CURVE, EQUAL SHARES, EQUATIONS, EQUILIBRIUM, EXPECTED PRESENT VALUE, EXPENDITURE, EXPENDITURES, EXPOSURE, FAIR, FAMILY LABOR, FARM, FARM PRODUCTIVITY, FARM SECTOR, FARM WORKERS, FARMERS, FARMLAND, FARMS, FOOD PRICE, FOOD PRICES, FOOD SECURITY, FUTURE RESEARCH, GENERAL EQUILIBRIUM, GEOGRAPHICAL LABOR MOBILITY, GLOBALIZATION, GOVERNMENT INTERVENTIONS, HOUSEHOLDS, INCOME, INCOME EFFECT, INCOME EFFECTS, INCOME ELASTICITY OF DEMAND, INCOME GROUP, INDUSTRIALIZATION, INFLATION, INNOVATION, INNOVATIONS, INPUT PRICES, INSURANCE, INTERNATIONAL MARKETS, LABOR COSTS, LABOR FORCE, LABOR MARKET, LABOR MARKET SEGMENTATION, LABOR MARKETS, LABOR MIGRATION, LABOR PRODUCTIVITY, LABORERS, LOW-INCOME COUNTRIES, MARGINAL PRODUCT, MARGINAL VALUE, MARKET ACCESS, MARKET INTEGRATION, MARKET PRICES, MARKET SEGMENTATION, MARKET WAGE, MARKETING, MILLS, MINIMUM WAGE, MOBILITY OF LABOR, NOMINAL WAGES, OUTPUT, OUTPUTS, PARTIAL EQUILIBRIUM ANALYSIS, PER CAPITA INCOME, POLITICAL ECONOMY, PRICE CHANGE, PRICE CHANGES, PRICE ELASTICITY, PRICE INCREASE, PRICE INCREASES, PRICE INDEX, PRICE INFLATION, PRICE MOVEMENT, PRICE MOVEMENTS, PRICE TRENDS, PRODUCER PRICES, PRODUCTION FUNCTION, PRODUCTION FUNCTIONS, PRODUCTIVITY, RETAIL, RETAIL PRICES, RICE PRICES, RURAL AREAS, SAFETY, SAFETY NET, SALES, STORAGE CAPACITY, SUBSTITUTION, SUGAR, SUPPLY OF SERVICES, TARIFF RATES, TRADE BARRIERS, TRADE LIBERALIZATION, TRADE POLICY, UNEMPLOYMENT, UNSKILLED LABOR, VARIABLE INPUTS, WAGE DETERMINATION, WAGE GROWTH, WAGE INCREASES, WAGES, WEALTH, WHOLESALE MARKETS, WHOLESALE PRICE, WHOLESALE PRICES, WTO,
Online Access:	http://documents.worldbank.org/curated/en/2013/04/17594223/food-prices-wages-welfare-rural-india https://hdl.handle.net/10986/14451
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