The relation between rice prices and wage rates in Bangladesh

The relation between rice prices and wage rates, particularly wage rates of unskilled laborers, is of immense practical relevance to the food policy debates of Bangladesh. The ultrapoor in Bangladesh earn most of their income from wages, and they spend about 60 percent of their income on foodgrains. Therefore, both the wage rate and the rice price are of critical concern to them. In the past the general argument against a high rice price was the consideration of adverse income effects of such prices on the welfare of the poor. In recent years, this 1ine of 1ogi c has been countered with the argument that such adverse effects on the poor are limited to the short run. In the long run, the poor also benefit from higher rice prices due to the positive re1ationship between wages and price of staples. The search for a reliable answer to this important question, which is so central to the price policy debates in Bangladesh, is the primary objective of the two essays presented here.

Thamarajakshi, R.
Ravallion, Martin
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International Food Policy Research Institute (IFPRI)
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