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Effects of rice prices on agricultural wage rates in Vietnam Nguyen, Diem Kieu

Abstract

The thesis aims to examine the relationship between agricultural wage rates and rice prices in Vietnam. This study is inspired in part by the fact that agricultural wage rates and rice prices are important factors affecting rural welfare; especially the rural poor who have little land holdings and rely on labor markets for the dominant share of their incomes. Rice farming does not only provide the staple food for over 90 percent of Vietnamese households, but also absorbs the greatest portion of the rural labor force in Vietnam. It is also of substantial interest how rural wage rates are actually determined, and to what extent rural versus urban factors are involved. In other words, to what extent are rural and urban labour markets integrated? We hypothesize that changes in rice prices will have a significant impact on agricultural wage rates. Furthermore, many previous studies show that there has been in some periods a significant gap between the domestic and world prices of rice due to the control over rice exports of the Vietnam government. These regulations have been relaxed since 2001, and therefore the domestic price of rice would now be more affected by external fluctuations. To answer how rice price changes affect agricultural wage rates, we make use of data at the colnmune level in Vietnam over the period from 1993-2002. We found that the effects of rice prices on real agricultural wage rates vary by year and from region to region. Generally, the regression results provide empirical evidence to support that agricultural factors have a sizeable effect on agricultural wage rates in Vietnam. But we found that non-agricultural factors also play an important role in increasing the wage rate for agricultural laborers. The nonagricultural wage rate, urban unemployment rate and the economy’s real growth rate were found to have significant, albeit smaller, effects on the agricultural wage rate in Vietnam.

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