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Abstract
Like many other Asian countries, the causal relationship between agricultural
productivity and the incidence of rural poverty has been a widely debated subject
in Bangladesh. A number of studies argued that the real agricultural wage rate
was declining during the period when the country had experienced overall
agricultural growth. This paper contributes to this debate in two ways: i) it reexamines
the methodological aspects of past studies and presents alternative
estimates; and ii) analyzes dynamics of agricultural wage and rice price using the
most recent data. Multivariate co-integration techniques are used to examine the
long and short-run relationships among agricultural wage rate, rice price, urban
wage rate, and other prices. The results show that agricultural wage and rice
price maintained strong co-integrating relationships during the periods 1949/50—
1979/80; and the elasticities of agricultural wage rate with respect to rice price
are substantially higher than what past studies had reported. Analyses of postfamine
data (1976/77—1998/99) suggest that rice price, which was strongly cointegrated
with agricultural wage rate until the early 80s, is no longer a significant
determinant of wage formation in Bangladesh.