The Impact of India’s Rural Employment Guarantee on Demand for Agricultural Technology
AbstractLandless agricultural laborers and marginal farmers constitute much of India’s poor. As population growth increases and more people enter an expanding rural labor force, either they must eke out a living in the rural sector or add to the growing pressure on the country’s urban areas. Meanwhile, agricultural jobs are fewer and the corresponding wages have been persistently below subsistence levels. The Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) takes aim at this problem by providing guaranteed employment to the rural poor at minimum wages in exchange for village public works. While the direct effects of this program appear clear—more income is being received by the poor, while village infrastructure is increasing—indirect effects within local agricultural economies abound. Theory developed in this paper shows the theoretical results of NREGA’s impact on agricultural wages, while recent empirical evidence demonstrates a 3-5% increase in agricultural wages. This has the potential to affect farm owners. A farm owner that relies on this targeted unskilled labor to fill relatively inexpensive labor roles during peak agricultural production periods may now alter his production decisions by choosing to adopt labor-saving technologies as a result of an increasing labor-to-capital input price ratios. I specify a threshold model of technology adoption to illustrate this short-run result. In the long run, there may be further ripple effects in the rural economy, including increased agricultural productivity and still higher wages for rural laborers. I use difference-in-differences and regression discontinuity designs to test my theoretical results empirically. These empirical methods take advantage of the unique nature of the phased program rollout.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 150163.
Date of creation: 2013
Date of revision:
Contact details of provider:
Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202
Phone: (414) 918-3190
Fax: (414) 276-3349
Web page: http://www.aaea.org
More information through EDIRC
Agricultural and Food Policy; Community/Rural/Urban Development; International Development; Research and Development/Tech Change/Emerging Technologies;
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Muellbauer, John & Portes, Richard, 1978. "Macroeconomic Models with Quantity Rationing," Economic Journal, Royal Economic Society, vol. 88(352), pages 788-821, December.
- Andrew D. Foster & Mark R. Rosenzweig, 2010.
"Microeconomics of Technology Adoption,"
984, Economic Growth Center, Yale University.
- Matin Qaim & Alain de Janvry, 2003. "Genetically Modified Crops, Corporate Pricing Strategies, and Farmers' Adoption: The Case of Bt Cotton in Argentina," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 814-828.
- Just, Richard E. & Zilberman, David, 1988. "The effects of agricultural development policies on income distribution and technological change in agriculture," Journal of Development Economics, Elsevier, vol. 28(2), pages 193-216, March.
- Frisvold, George B., 1994. "Does supervision matter? Some hypothesis tests using Indian farm-level data," Journal of Development Economics, Elsevier, vol. 43(2), pages 217-238, April.
- Osmani, S. R., 1990. "Wage determination in rural labour markets : The theory of implicit co-operation," Journal of Development Economics, Elsevier, vol. 34(1-2), pages 3-23, November.
- Timothy G. Conley & Christopher R. Udry, 2010.
"Learning about a New Technology: Pineapple in Ghana,"
American Economic Review,
American Economic Association, vol. 100(1), pages 35-69, March.
- Timothy G. Conley & Christopher R. Udry, 2005. "Learning about a new technology: pineapple in Ghana," Proceedings, Federal Reserve Bank of San Francisco.
- Conley, T.G. & Udry, C.R., 2000. "Learning about a New Technology: Pineapple in Ghana," Papers 817, Yale - Economic Growth Center.
- Azam, Mehtabul, 2012. "The Impact of Indian Job Guarantee Scheme on Labor Market Outcomes: Evidence from a Natural Experiment," IZA Discussion Papers 6548, Institute for the Study of Labor (IZA).
- Shenggen Fan & Peter Hazell & Sukhadeo Thorat, 2000. "Government Spending, Growth and Poverty in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 1038-1051.
- Besley, Timothy & Case, Anne, 1993. "Modeling Technology Adoption in Developing Countries," American Economic Review, American Economic Association, vol. 83(2), pages 396-402, May.
- Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
- Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
- Basu, Arnab K., 2011. "Impact of Rural Employment Guarantee Schemes on Seasonal Labor Markets: Optimum Compensation and Workers' Welfare," IZA Discussion Papers 5701, Institute for the Study of Labor (IZA).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.