Work and Income Sharing in a Rural Economy: Effect on Economic Growth and Welfare

Nobuyuki Iwai, Stanley R. Thompson

Department of Agricultural, Environmental and Development Economics, Ohio State University, Columbus, USA.
Food and Resource Economics Department, University of Florida, Gainesville, USA.

DOI: 10.4236/tel.[phone]                

Abstract

An endogenous growth model is developed to explore the effect of work and income sharing (WIS) on economic growth and welfare in a developing rural economy. The practice of WIS is a mechanism which converts incremental diversity of risk into volatility reduction and overall welfare gain. However, the effect on economic growth is sector specific. WIS in the intermediate goods sector has a pro-growth effect through higher investment returns while in the agricultural sector it has an anti-growth effect through lower precautionary savings. WIS also decreases the level of regional government subsidies needed to achieve the optimal growth rate.

Keywords

Work and Income Sharing, Rural Economy, Endogenous Growth Model, Welfare in Developing Countries, Technology Adaptation

Conflicts of Interest

The authors declare no conflicts of interest.

References

[1]	Hayami, Y. and Kikuchi, M. (1982) Asian Village Economy at the Crossroads: An Economic Approach to Institutional Change. Johns Hopkins University Press, Baltimore.
[2]	Hayami, Y. and Godo, Y. (2005) Development Economics: From the Poverty to the Wealth of Nations. Oxford University Press, Oxford. http://dx.doi.org/10.1093/0199272700.001.0001
[3]	Collier, W.L., Wiradi, G. and Soentoro (1973) Recent Changes in Rice Harvesting Methods. Bulletin of Indonesian Economic Studies, 9, 36-45. http://dx.doi.org/10.1080/00074917312331332252
[4]	Clay, E.J. (1976) Institutional Change and Agricultural Wages in Bangladesh. Bangladesh Development Studies, 4, 423-440.
[5]	Tsuruta, T. (2001) The Changing Process of Labor Exchange Custom in Central Thai Villages. Journal of Food and Agriculture, 48, 11-19. (in Japanese)
[6]	Takahashi, A. (1970) Land and Peasants in Central Luzon; Socio-Economic Structure of a Philippine Village. East- West Center Press, Honolulu.
[7]	Scott, J.C. (1977) The Moral Economy of the Peasant: Rebellion and Subsistence in Southeast Asia. Yale University Press, New Haven.
[8]	Popkin, S.L. (1979) The Rational Peasant: The Political Economy of Rural Society in Vietnam. University of California Press, Oakland.
[9]	Hayami, Y. and Kikuchi, M. (2000) A Rice Village Saga: Three Decades of Green Revolution in the Philippines. Macmillan Press, London.
[10]	Romer, P.M. (1990) Endogenous Technological Change. Journal of Political Economy, 98, S71-S102. http://dx.doi.org/10.1086/261725
[11]	Grossman, G.M. and Helpman, E. (1991) Innovation and Growth in the Global Economy. MIT Press, Cambridge.
[12]	Pray. C.E. and Fuglie, K.O. (2001) Private Investment in Agricultural Research and International Technology Transfer in Asia. Agricultural Economics Report No. 805, US Department of Agriculture, Washington DC.
[13]	Kongsamut, P., Rebelo, S. and Xie, D. (2001) Beyond Balanced Growth. Review of Economic Studies, 68, 869-882. http://dx.doi.org/10.1111/1467-937X.00193
[14]	Gollin, D., Parente, S. and Rogerson, R. (2002) The Role of Agriculture in Development. American Economic Review, 92, 160-164. http://dx.doi.org/10.1257/000282802320189177
[15]	Vargas-Lundius, R. and Lanly, G. (2007) Migration and Rural Employment. Proceedings of the Round Table on Migration and Rural Employment in Conjunction with the Thirtieth Session of IFAD’s Governing Council, February 2007.
[16]	Spielman, D.J. and Von Grebmer, K. (2004) Public-Private Partnerships in Agricultural Research: An Analysis of Challenges Facing Industry and the Consultative Group on International Agricultural Research. Environment and Production Technology Division Discussion Paper No. 113, International Food Policy Research Institute, Washington DC.
[17]	Ruttan, V.W. and Hayami, Y. (1984) Toward a Theory of Induced Institutional Innovation. Journal of Development Studies, 20, 203-223. http://dx.doi.org/10.1080/00220388408421914
[18]	Acemoglu, D. (2008) Introduction to Modern Economic Growth. Princeton University Press, Princeton.
[19]	Gardner, G.W. and Kimbrough, K.P. (1989) The Behavior of US Tariff Rates. American Economic Review, 79, 211-218.
[20]	Grossman, G.M. and Helpman, E. (1991) Quality Ladders in the Theory of Growth. Review of Economic Studies, 58, 43-61. http://dx.doi.org/10.2307/2298044
[21]	Rosenzweig, M.R. and Binswanger, H.P. (1993) Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments. Economic Journal, 103, 56-78. http://dx.doi.org/10.2307/2234337
[22]	Barnett, B.J., Barrett, C.B. and Skees, J.R. (2008) Poverty Traps and Index-Based Risk Transfer Products. World Development, 36, 1766-1785. http://dx.doi.org/10.1016/j.worlddev.2007.10.016