Working Paper
Wage Determination in Rural Labour Markets

The nature of labour market in traditional rural societies has attracted a lot of attention in the recent years. One issue that has appeared particularly intriguing is the process of wage determination. After a good deal of theorising as well as detailed empirical research, the matter still remains largely unresolved. This paper takes a fresh look at this issue, focusing specifically on the casual or daily labour market of the kind typically observed in rural South Asia. In contrast to much of current thinking which emphasizes the role of employers' behaviour, we examine the point of view of workers and suggest the hypothesis that the process of wage determination is best seen as an act of 'implicit co-operation' among them. The basic approach is motivated in section I by noting, very briefly, the inadequacies of some of the major alternative approaches. Section II sets out the empirical context and assumptions underlying the formal model which is developed in section III. The model is informally extended in section IV in order to examine certain real-life features of rural labour markets, and finally some concluding remarks are offered in section V.