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Can Rural Public Works Affect Agricultural Wages? Evidence from India

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  • Erlend Berg
  • Sambit Bhattacharyya
  • Rajasekhar Durgam
  • Manjula Ramachandra

Abstract

It has long been hypothesised that public works programmes, in addition to the welfare effect on those directly employed, can influence equilibrium wage rates. In this paper we test the impact of the Indian government’s major public works programme, the National Rural Employment Guarantee (NREG), on agricultural wages. The rollout of NREG in three phases is used to identify difference-in-difference estimates of the programme effect. Using monthly wage data from the period 2000-2011 for a panel of 249 districts across 19 Indian states, we find that on average NREG boosts the real daily agricultural wage rates by 5.3 per cent. It takes 6 to 11 months for an NREG intensity shock to feed into higher wages. The wage effect appears to be gender neutral and biased towards unskilled labour. It is positive across different implementation stages and months. It remains significant even after controlling for rainfall; district and time fixed effects; and phase-wise linear, quadratic, and cubic time trends. The validity of our identification strategy is confirmed by placebo tests. We argue that since most of the world’s poor live in rural areas, and the poorest of the poor are agricultural wage labourers, rural public works constitute a potentially important anti-poverty policy tool.

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Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 2012-05.

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Date of creation: 2012
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Handle: RePEc:csa:wpaper:2012-05

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Keywords: Public works; Workfare; NREG; Agricultural wages;

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Cited by:
  1. Clément Imbert & John Papp, 2013. "Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee," CSAE Working Paper Series, Centre for the Study of African Economies, University of Oxford 2013-03, Centre for the Study of African Economies, University of Oxford.
  2. Imbert, Clément, 2013. "Travailler pour être aidé? L’emploi garanti en Inde," Opuscules du CEPREMAP, CEPREMAP, CEPREMAP, number 33, May.
  3. Thiemo Fetzer, 2014. "Can Workfare Programs Moderate Violence? Evidence from India," STICERD - Economic Organisation and Public Policy Discussion Papers Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE 53, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. Chaudhuri, Sarbajit & Ghosh Dastidar, Krishnendu, 2014. "Corruption, efficiency wage and union leadership," MPRA Paper 57050, University Library of Munich, Germany.

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