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Economic Development and Cultural Change
Hans P. Binswanger and Mark R. Rosenzweig, eds. Contractual Arrangements, Employment, and Wages in Rural Labor Markets in Asia.
New Haven, Conn.: Yale University Press, 1984. Pp. xvii+319.
Joseph D. Reid, Jr.
George Mason University
Contractual Arrangements, Employment, and .Wages in Rural Labor
Markets in Asia consists of 14 papers originally presented at a Ford
Foundation-A/D/C-ICRISAT conference in Hyderabad, India, August
22-24, 1979. As indicated by the title, the papers analyze or describe
the workings of rural Asian labor markets. The papers are presented
under three subheadings: "Tenurial Arrangements: Theory and Evidence"; "Dynamics and Rigidity in Labor Markets: Contractual Arrangements, Wage Adjustments, and Segmentation"; and "Econometric Models of Labor Supply and Demand." They are summarized
in an introductory paper prepared by the volume editors, Hans P.
Binswanger and Mark R. Rosenzweig.
The book opens with a howler: "Although improving the lot of
poor people was a paramount concern of the conference, the authors of
the papers . . . were vitally concerned with the need for validated
models of the rural labor market .. ." (p. xv). Of course, the volume
exemplifies The Law of Although: The phrase following "although"
always is a lie; the truth begins after the comma. Here post-comma
truth is not the whole truth, in all likelihood. Many of the contributors
are the authors of, to use their word after mine, severely invalidated
models of rural Asian labor markets, and I detect a tone of self-pity for
and defense of their past mistakes in several places (including the justquoted sentence). Perhaps I am too harsh in my judgment, but I consider that self-pitying defense symptomatic of the fatal flaw of these
conference papers and generally of the development analyses of the
alphabet establishments (IMF, IBRD, A/D/C, etc.). The defense and
pity stem from the wrong assumption that only what is modeled fully
and explicitly can and should be believed (in spite of common sense or
its clear repudiation in all other times and places). The assumption is
still maintained in these papers, although the conclusions now reached
are closer to what everyone else has known for years.
The principal conclusion here accepted officially by alphabeteers
is that rural Asian labor markets are pretty competitive, except across
regions (and perhaps for good reason) and across sexes (here the evidence for good reason or for tradition is less clear). In particular:
Farms small and large employ family and other labor as if a fluctuating
opportunity wage mattered. The higher effort per acre recorded frequently on smaller farms is explained better by different crops and land
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qualities (higher-quality lands typically cost more, are farmed in
smaller units, and use more labor per acre) than by a dual labor market.
Tenancy (mainly sharecropping) is used to balance complementary
resources (land, bullocks, managerial know-how, and labor) for
efficient farm production, rather than to exploit labor inefficiently.
Credit through tenancy is provided when it is done most cheaply that
way, rather than to exploit the borrower usuriously. Seasonal mobility
of labor from home to market and within regions is high. Migrations of
greater distance and for greater periods are not as frequent, especially
by landowners. The poor go from school to work sooner and stay in
low-skill jobs longer. Rural labor markets can be modeled in a demand
and supply framework.
Surprised? The authors are. They call generally for more modeling
work to see whether it can be so-can these markets be represented so
well by the most basic assumption of Economics, competition at all
margins? But I do not think that they should be surprised.' As a corollary, I do not think that their further efforts to confirm and record the
obvious should be supported. Their amazement at the extent of competition in rural labor markets shows that they do not have an eye trained
to see or a mind to anticipate efficient markets. Clearly, the majority of
the alphabeteers do not have a comparative advantage at choosing
research topics (or else they would not have spent the past 20 years
analyzing those noncompetitive labor markets that they here admit do
not exist). But, if not great thinkers or intuiters, they are good technical
modelers. That means that someone else should direct their efforts. My
nomination is to direct them toward modeling the implications of world
prices for regional factor markets. For instance, what will pricing food
at the world price do to land and labor in, say, Indonesia? That is a
complex question with many ramifications that we know how to model
but have not often done so to get real answers (e.g., 10% of landless
rural males and 25% of females will migrate to Jakarta), and the magnitudes of the real answers are as important as the signs.
1. For instance, in "Sharecroppingand AgriculturalUncertainty"(Economic Development and Cultural Change 24 [April 1976]: 549-76) I deduced
and in "Sharecroppingand Tenancy in AmericanHistory" (in Risk, Uncertainty, and Economic Development, ed. J. A. Roumassetet al. [New York:
SEARCA, 1979], pp. 283-309) empirically confirmed that sharecropping was
used in the United States to managenecessarilycoordinatedinputsfor efficient
production. James Roumasset and W. T. James ("ExplainingVariationsin
Share Contracts: Land Quality, Population Pressure, and Technological
Change," Australian Journal of Agricultural Economics 23 [August 1979]:
116-27) have done the same for the Philippines.
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