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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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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number WPS/2012-05.

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Date of creation: 01 May 2012
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Handle: RePEc:oxf:wpaper:wps/2012-05

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Keywords: 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 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, number 33, May.

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