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Dynamics of rice prices and agricultural wages in the Philippines
Author(s) -
Lasco Christine D.,
Myers Robert J.,
Bernsten Richard H.
Publication year - 2008
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/j.1574-0862.2008.00304.x
Subject(s) - economics , cointegration , agriculture , short run , wage , welfare , error correction model , liberalization , econometrics , labour economics , macroeconomics , market economy , ecology , biology
Abstract Rice trade liberalization in the Philippines should decrease domestic rice prices impacting both agricultural wages and the welfare of agricultural wage earners. This study examines the short‐run and long‐run relationship between rice prices and agricultural wages in the Philippines using a neoclassical wage determination model. Three empirical frameworks are used—a cointegration/error correction framework, which assumes nonstationary variables in long‐run equilibrium, a first difference model that assumes nonstationary variables but no long‐run equilibrium, and an OLS framework that assumes the model variables are stationary. Conclusions are reasonably robust across the three empirical frameworks with wages adjusting positively to rice price changes with a short‐run elasticity of 0.29 to 0.57, and a long‐run elasticity of 0.70 to 1.0 in preferred models. An analysis of welfare implications suggests that although households that are heavily reliant on agricultural wages for income will be adversely affected by rice price decreases, other households will benefit.