Agricultural Development Economics


The impact of health and nutritional status of farmers on their productivity and efficiency: Evidence from Ethiopia
Croppenstedt, A. and C. Muller
Publication date
In this article we focus on the link between nutrition and health and labor productivity. The link between productivity and consumption and its impact on wages was first explored among others by H. Leibenstein, J. E. Stiglitz, J. A. Mirrlees, and C. Bliss and N. Stern, and is now commonly referred to as the ‘‘efficiency wage theory.’’ In this model the work effort of the agricultural worker is represented by l(c), an increasing function of consumption c, which is first convex then concave as c increases. Wage W and consumption c are generally considered as equal. The maximization of agricultural profit by the landlord yields the equation l¢(W)/l(W) 5 1/W, the solution of which is the efficiency wage. Incorporated in a simple representation of the labor market this model helps to explain why there may exist labor surplus in poor agricultural economies simultaneously with strictly positive wages. Bliss and Stern show that with such models, workers with different nutritional assets or alternative sources of consumption are paid different levels of efficiency wages. Dasgupta and Ray analyze the characteristics of market equilibrium. They note that asset redistribution and food transfers, which impose redistribution in rural areas, result in lower aggregate unemployment and greater aggregate output.