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A quantitative analysis of employment guarantee programmes with an application to rural India

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  • Pushkar Maitra

Abstract

This paper examines the welfare effects of a workfare programme in an economy where agents face exogenous income shocks and are unable to insure themselves through private markets. A dynamic general equilibrium model is calibrated using data from two ICRISAT villages in the Indian state of Maharashtra, which had a functioning Employment Guarantee Scheme (EGS), in the period 1979-84. The optimal wage and the welfare gains of the program depend on how productive the EGS is, relative to the private sector. When agents are paid the optimal wage rate, they do not hold the non-interest-bearing asset for precautionary savings and all insurance is provided by the EGS. There are significant welfare gains from paying the optimal wage rate as opposed to simply paying the marginal product of labour in the EGS.

Suggested Citation

  • Pushkar Maitra, 2001. "A quantitative analysis of employment guarantee programmes with an application to rural India," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(2), pages 211-228.
  • Handle: RePEc:taf:jitecd:v:10:y:2001:i:2:p:211-228
    DOI: 10.1080/09638190110039055
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    References listed on IDEAS

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    1. Youngjae Lim & Robert Townsend, 1998. "General Equilibrium Models of Financial Systems: Theory and Measurement in Village Economies," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 59-118, January.
    2. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, vol. 100(1), pages 118-142, February.
    3. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
    4. repec:syd:wpaper:9709 is not listed on IDEAS
    5. Pushkar Maitra, 2001. "A quantitative analysis of employment guarantee programmes with an application to rural India," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(2), pages 211-228.
    6. Rosenzweig, Mark R, 1988. "Risk, Implicit Contracts and the Family in Rural Areas of Low-income Countries," Economic Journal, Royal Economic Society, vol. 98(393), pages 1148-1170, December.
    7. Robert M. Townsend, 1995. "Consumption Insurance: An Evaluation of Risk-Bearing Systems in Low-Income Economies," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 83-102, Summer.
    8. Martin Ravallion & Shubham Chaudhuri, 1997. "Risk and Insurance in Village India: Comment," Econometrica, Econometric Society, vol. 65(1), pages 171-184, January.
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    Cited by:

    1. Pushkar Maitra, 2001. "A quantitative analysis of employment guarantee programmes with an application to rural India," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(2), pages 211-228.
    2. Ananish Chaudhuri & Pushkar Maitra, 1997. "Determinants of Land Tenure Contracts; Theory and Evidence from Rural India," Departmental Working Papers 199710, Rutgers University, Department of Economics.

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