ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Link between Food Price Inflation and Rural Wage Dynamics

In exploring the link between food price inflation and rising rural real wages, this paper examines the dynamic relations between rural wages in different sectors and the relationship these wages share with increasing food prices. It looks into the possibility of a Lewisian transformation causing an increase in real rural wages, but the result of the analysis suggests that the rise in wages is because of an increase in bargaining power due to public works programmes, which employ unskilled rural workers. Food price inflation induces them to bargain for higher wages.

We would like to thank Ravikiran for helping us generate Tables 3 and 4. A preliminary version of this paper was presented at the Department of Economics, Visva-Bharati University, in March 2013 under the Special Assistance Programme. We would also like to thank an anonymous referee of this journal for his/her suggestions.

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