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Vol. 59, No. 3, pp. 266-285 (2008)

“Wages in Kind and Economic Development -Their Impacts on Labor Supply and Food Security of Rural Households in Developing Countries-”
Takashi Kurosaki (Institute of Economic Research, Hitotsubashi University)

This paper investigates the function of various modes of wage payment, focusing on the role of in-kind wages in enhancing household food security in developing countries. It first demonstrates the importance of in-kind wage payment in the initial phase of economic development through compiling historical records from Asian countries including pre-war Japan and colonial India. This section is followed by a survey of theoretical explanations in-kind wages. As a relatively unexplored explanation, this paper then develops a theoretical model of labor supply to different labor contracts, incorporating considerations of food security as the main explanation for in-kind wages. The theoretical model predicts that when food security considerations are important for workers, possibly due to poverty and underdeveloped food markets, they work more under a contract with wages paid in kind (food) than under a contract with wages paid in cash. This prediction is supported by empirical evidence from rural Myanmar. Estimation results of the reduced-form determinants of labor supply show that workers supply more labor to a job whose wages are paid in kind when the share of staple food in workers' budget is higher and the farmland on which they produce food themselves is smaller.