An analysis of employment and earnings of poor women in rural Bangladesh

Abstract

This thesis is concerned with two types of employment among poor rural women in Bangladesh: wage employment and self employment. For women in wage employment, the determinants of wage rates and the amount of wage employment obtained are analysed. Existing theories of wage determination do not adequately explain the variations in wage rates among female wage workers. An alternative explanation in terms of a modified supply-demand framework is developed. This framework explains the existence of underemployment and the variations in wage rates in terms of the reservation wages of these women. Empirical tests confirm the hypothesis that wage variations are associated with factors influencing the reservation wages of women. In the presence of underemployment in the villages, the amount of employment was not influenced by supply considerations but was determined on the demand side. The elasticity of employment with respect to wage rates was, however, low. Therefore the amounts earned were not positively influenced by the acceptance of low wages. In the absence of the availability of an unconstrained amount of market employment at exogenously given wage rates, the amount of self employment was determined by equating the productivity of such employment with the opportunity cost of labour in housework. Self employment, therefore, was found to be influenced by family responsibilities and by the amount of capital invested in an enterprise. The latter influenced the productivity of self employment. Self employment was financed by the Grameen Bank (a special financial institution lending to landless households). The probability of becoming a Grameen Bank member was not influenced by the landless women's initial resource endowment. The efficiency of resource use was not affected by a woman's family situation or families' resource endowments. Self employment activities were found to generate higher average rates of return to labour than the average wage rates. Average employment and earnings were also higher. The benefits of self employment were also indicated by the fact that the Grameen Bank members had a larger number of meals and larger expenditure on clothing than other landless women in the village. These findings have important policy implications in terms of the expansion of self employment opportunities. However, it has been noted that other direct and indirect costs and benefits of lending to the very poor need to be researched before policy conclusions are reached.