New agricultural technology, timeliness and wages for labour: a longitudinal study of rural wages in India

Abstract

While there is widespread agreement that the spread of new technology crops in India since the mid-1960s has affected rural wages, there is considerable disagreement over the nature of this effect. The existing literature has posed this problem in a demand–supply framework – with a rise in agricultural wages ascribed to increased labour demand caused by this technology change, and stagnant or falling wages attributed to labour supply growth outstripping labour demand. In this paper we reconsider this issue in a modified framework. Within a competitive demand–supply framework we add another aspect of production technology that is idiosyncratic to agriculture, namely, sensitivity of yields to timing of farm operations (say, planting date). It is common knowledge that mistiming can cause substantial yield loss. In a competitive labour market this causes greater impatience on the farmers' part. They are willing to pay a higher wage rather than risk loss of yield. As newer technology crops tend to be more time sensitive, this puts an upward pressure on wages. In this paper we test this hypothesis using annual state-level data from India for the period 1970–85. Delineating the demand-supply effect of new technology on wages from that of the timeliness effect, we indeed find supportive evidence for the above hypothesis.