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A Theory of Employment Guarantees: Contestability, Credibility and Distributional Concerns

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Author Info

  • Basu, Arnab K.

    ()
    (Cornell University)

  • Chau, Nancy

    ()
    (Cornell University)

  • Kanbur, Ravi

    ()
    (Cornell University)

Abstract

Both raw intuition and past experience suggest that the success of an employment guarantee scheme (EGS) in safeguarding the welfare of the poor depends both on the wage it promises, and the ease with which any worker can gain access. An EGS is thus at once a wage guarantee and a rationing device. We chart the positive and normative limits of such an EGS as an efficiency improving and poverty alleviating policy reform in a canonical labor market setting. At its core, an EGS provides an aggregate, not just EGS, employment target. Given the target, the EGS wage and access can be fine-tuned to deliver outcomes ranging from a contestable labor market to a simple universal unemployment benefit. The credibility of any such target, however, is shown to be triggered endogenously by a host of factors: the distributional concerns of the planner, private sector productivity, the prevalence of market power and the need for public works. Paradoxically, the outcome with a planner who cares only about efficiency can be less efficient than the outcome with a planner whose social welfare function also gives weight to poverty!

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3002.

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Length: 41 pages
Date of creation: Aug 2007
Date of revision:
Publication status: published in: Journal of Public Economics, 2009, 93 (3-4), 482-497
Handle: RePEc:iza:izadps:dp3002

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Keywords: distribution concern; employment guarantees; employment targeting; credibility;

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References

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  1. Blaug, Mark, 1963. "The Myth of the Old Poor Law and the Making of the New," The Journal of Economic History, Cambridge University Press, vol. 23(02), pages 151-184, June.
  2. Dreze, Jean & Sen, Amartya, 1991. "Hunger and Public Action," OUP Catalogue, Oxford University Press, number 9780198283652, Octomber.
  3. Basu, Arnab K. & Chau, Nancy H. & Kanbur, Ravi, 2009. "A theory of employment guarantees: Contestability, credibility and distributional concerns," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 482-497, April.
  4. Basu, Arnab K. & Chau, Nancy H. & Kanbur, Ravi, 2005. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," Working Papers 127081, Cornell University, Department of Applied Economics and Management.
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  12. 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).
  13. Ravallion, Martin, 1991. "Reaching the Rural Poor through Public Employment: Arguments, Evidence, and Lessons from South Asia," World Bank Research Observer, World Bank Group, vol. 6(2), pages 153-75, July.
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  17. Bardhan, Pranab K, 1979. "Labor Supply Functions in a Poor Agrarian Economy," American Economic Review, American Economic Association, vol. 69(1), pages 73-83, March.
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Citations

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Cited by:
  1. Basu, Arnab K. & Chau, Nancy & Kanbur, Ravi, 2007. "A Theory of Employment Guarantees: Contestability, Credibility and Distributional Concerns," IZA Discussion Papers 3002, Institute for the Study of Labor (IZA).
  2. ArnabK. Basu & NancyH. Chau & Ravi Kanbur, 2010. "Turning a Blind Eye: Costly Enforcement, Credible Commitment and Minimum Wage Laws," Economic Journal, Royal Economic Society, vol. 120(543), pages 244-269, 03.
  3. Arnab Basu, 2013. "Impact of rural employment guarantee schemes on seasonal labor markets: optimum compensation and workers’ welfare," Journal of Economic Inequality, Springer, vol. 11(1), pages 1-34, March.
  4. Clement Imbert & John Papp, 2013. "Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee," Economics Series Working Papers WPS/2013-03, University of Oxford, Department of Economics.
  5. repec:hal:wpaper:halshs-00680451 is not listed on IDEAS
  6. Chau, Nancy H. & Kanbur, Ravi & Qin, Yu, 2012. "DO PUBLIC WORK SCHEMES DETER OR ENCOURAGE OUTMIGRATION? Empirical Evidence from China," Working Papers 128799, Cornell University, Department of Applied Economics and Management.
  7. Niehaus, Paul & Sukhtankar, Sandip, 2013. "The marginal rate of corruption in public programs: Evidence from India," Journal of Public Economics, Elsevier, vol. 104(C), pages 52-64.
  8. K.S. Kavi Kumar & Kamal Karunagoda & Enamul Haque & L. Venkatachelam & Girish Nath Bahal, 2012. "Addressing Long-term Challenges to Food Security and Rural Livelihoods in South Asia," Working Papers 2012-075, Madras School of Economics,Chennai,India.
  9. Dutta, Puja & Murgai, Rinku & Ravallion., Martin & van de Walle, Dominique, 2012. "Does India's employment guarantee scheme guarantee employment ?," Policy Research Working Paper Series 6003, The World Bank.
  10. 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).
  11. Ghani, Ejaz & Mani, Anandi & O'Connell, Stephen D., 2013. "Can political empowerment help economic empowerment ? women leaders and female labor force participation in India," Policy Research Working Paper Series 6675, The World Bank.
  12. Clément Imbert & John Papp, 2012. "Equilibrium Distributional Impacts of Government. Employment Programs: Evidence from India's Employment Guarantee," PSE Working Papers halshs-00680451, HAL.
  13. Goto, Hideaki, 2008. "Labor Market Competitiveness and Poverty," Working Papers 51159, Cornell University, Department of Applied Economics and Management.
  14. 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).
  15. Imbert, Clément, 2013. "Travailler pour être aidé? L’emploi garanti en Inde," Opuscules du CEPREMAP, CEPREMAP, number 33, May.

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