An Econometric Model of Agricultural Wages in Bangladesh

In recent years, a consensus is emerging in favour of the trickle down hypothesis in traditional agriculture. However, any convincing evidence was still lacking in the Bangladesh context. To fill up this gap, the wage models of Rahman (1993) and Ravallion (1994) have shown that agricultural production affects rural wages positively in the short run, which may be interpreted to constitute evidence in favour of the trickle down hypothesis in the short run, but any long run evidence could not be discerned. However, this seems to suggest that possibly one required only the right sort of model for the purpose. To this end, this paper presents an error correction model of rural wages, which shows that agricultural production has significant favourable impact on rural wages in the long run. This may have obvious implications for designing poverty alleviation policies