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Induced Wage Effects of Changes in Food Prices in Egypt

The trend in real agricultural wages in Egypt over the two decades since the mid-1970s is well described by an inverted U-shaped curve with a peak around 1985. But the rise and fall of real wages masks a complex dynamic process by which nominal wages adjust in response to changes in food prices. We use governorate-level panel data for 1976–93 to explore the nature of this adjustment process. Our results indicate that nominal wages adjust slowly. There is a significant negative initial impact of rising food prices on real wages, though wages do catch up in the long run.