IDEAS home Printed from https://ideas.repec.org/p/bav/wpaper/152_gehrke.html
   My bibliography  Save this paper

An employment guarantee as risk insurance? Assessing the effects of the NREGS on agricultural production decisions

Author

Listed:
  • Esther Gehrke

Abstract

This paper assesses the role of risk constraints in households’ production decisions. Using representative panel data for Andhra Pradesh, India, it analyses the effects of the National Rural Employment Guarantee Scheme (NREGS) on households’ crop choices. This paper shows that the introduction of the NREGS reduces households’ uncertainty about future income streams because it provides reliable employment opportunities in rural areas independently of weather shocks and crop failure. Households with access to the NREGS can therefore increase the share of inputs allocated to more profitable but also riskier crops, especially cotton. These shifts in agricultural production can considerably raise the incomes of smallholder farmers. Linking the employment guarantee to risk considerations is the key innovation of this paper. Therewith, it provides empirical evidence of the validity of the theory of decision-making under uncertainty and contributes to the ongoing debate on the effects of the NREGS on agricultural productivity.

Suggested Citation

  • Esther Gehrke, 2014. "An employment guarantee as risk insurance? Assessing the effects of the NREGS on agricultural production decisions," Working Papers 152, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:152_gehrke
    as

    Download full text from publisher

    File URL: http://www.bgpe.de/texte/DP/152_Gehrke.pdf
    File Function: First version, 2014
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Arnab Basu, 2013. "Impact of rural employment guarantee schemes on seasonal labor markets: optimum compensation and workers’ welfare," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 11(1), pages 1-34, March.
    2. Agurto Adrianzén, Marcos, 2014. "Social Capital and Improved Stoves Usage Decisions in the Northern Peruvian Andes," World Development, Elsevier, vol. 54(C), pages 1-17.
    3. Esther Duflo & Michael Kremer & Jonathan Robinson, 2011. "Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya," American Economic Review, American Economic Association, vol. 101(6), pages 2350-2390, October.
    4. Esther Duflo & Michael Kremer & Jonathan Robinson, 2008. "How High Are Rates of Return to Fertilizer? Evidence from Field Experiments in Kenya," American Economic Review, American Economic Association, vol. 98(2), pages 482-488, May.
    5. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 597-652.
    6. Dercon, Stefan & Christiaensen, Luc, 2011. "Consumption risk, technology adoption and poverty traps: Evidence from Ethiopia," Journal of Development Economics, Elsevier, vol. 96(2), pages 159-173, November.
    7. Dercon, Stefan, 1996. "Risk, Crop Choice, and Savings: Evidence from Tanzania," Economic Development and Cultural Change, University of Chicago Press, vol. 44(3), pages 485-513, April.
    8. Shawn Cole & Xavier Giné & James Vickery, 2017. "How Does Risk Management Influence Production Decisions? Evidence from a Field Experiment," Review of Financial Studies, Society for Financial Studies, vol. 30(6), pages 1935-1970.
    9. Foster, Andrew D & Rosenzweig, Mark R, 1996. "Technical Change and Human-Capital Returns and Investments: Evidence from the Green Revolution," American Economic Review, American Economic Association, vol. 86(4), pages 931-953, September.
    10. Jha, Raghbendra & Gaiha, Raghav & Pandey, Manoj K., 2012. "Net transfer benefits under India's rural employment guarantee scheme," Journal of Policy Modeling, Elsevier, vol. 34(2), pages 296-311.
    11. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
    12. Andrew D. Foster & Mark R. Rosenzweig, 2010. "Microeconomics of Technology Adoption," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 395-424, September.
    13. Rosenzweig, Mark R & Wolpin, Kenneth I, 1993. "Credit Market Constraints, Consumption Smoothing, and the Accumulation of Durable Production Assets in Low-Income Countries: Investment in Bullocks in India," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 223-244, April.
    14. Hainmueller, Jens, 2012. "Entropy Balancing for Causal Effects: A Multivariate Reweighting Method to Produce Balanced Samples in Observational Studies," Political Analysis, Cambridge University Press, vol. 20(01), pages 25-46, December.
    15. Tavneet Suri, 2011. "Selection and Comparative Advantage in Technology Adoption," Econometrica, Econometric Society, vol. 79(1), pages 159-209, January.
    16. Afridi, Farzana & Mukhopadhyay, Abhiroop & Sahoo, Soham, 2012. "Female Labour Force Participation and Child Education in India: The Effect of the National Rural Employment Guarantee Scheme," IZA Discussion Papers 6593, Institute of Labor Economics (IZA).
    17. 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.
    18. Seema Jayachandran, 2006. "Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 538-575, June.
    19. Fafchamps, Marcel & Pender, John, 1997. "Precautionary Saving, Credit Constraints, and Irreversible Investment: Theory and Evidence from Semiarid India," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 180-194, April.
    20. Munshi, Kaivan, 2004. "Social learning in a heterogeneous population: technology diffusion in the Indian Green Revolution," Journal of Development Economics, Elsevier, vol. 73(1), pages 185-213, February.
    21. Rosenzweig, Mark R & Binswanger, Hans P, 1993. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Economic Journal, Royal Economic Society, vol. 103(416), pages 56-78, January.
    22. Hans P. Binswanger-Mkhize, 2012. "Is There Too Much Hype about Index-based Agricultural Insurance?," Journal of Development Studies, Taylor & Francis Journals, vol. 48(2), pages 187-200, February.
    23. Yaa Akosa Antwi & Asako S. Moriya & Kosali Simon, 2013. "Effects of Federal Policy to Insure Young Adults: Evidence from the 2010 Affordable Care Act's Dependent-Coverage Mandate," American Economic Journal: Economic Policy, American Economic Association, vol. 5(4), pages 1-28, November.
    24. Clément Imbert & John Papp, 2015. "Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 233-63, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:spr:ijlaec:v:61:y:2018:i:4:d:10.1007_s41027-019-0151-x is not listed on IDEAS
    2. Mihir Shah, 2016. "Should India do away with the MGNREGA?," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 59(1), pages 125-153, March.
    3. repec:eee:wdevel:v:107:y:2018:i:c:p:111-124 is not listed on IDEAS
    4. Chakravarty, Shourish & Mullally, Conner, 2018. "Impact of NREGS on Forest Cover," 2018 Annual Meeting, February 2-6, 2018, Jacksonville, Florida 266696, Southern Agricultural Economics Association.
    5. Deepak Varshney & Deepti Goel & J. V. Meenakshi, 2018. "The Impact of MGNREGA on Agricultural Outcomes and the Rural Labour Market: A Matched DID Approach," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 61(4), pages 589-621, December.
    6. Chakravarty, Shourish & Mullally, Conner C., 2018. "Impact of NREGS on Forest Cover," 2018 Annual Meeting, August 5-7, Washington, D.C. 274250, Agricultural and Applied Economics Association.
    7. Gehrke, Esther & Hartwig, Renate, 2015. "How can public works programmes create sustainable employment?," Discussion Papers 11/2015, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE).
    8. repec:eee:wdevel:v:117:y:2019:i:c:p:98-111 is not listed on IDEAS
    9. Bell, Clive & Mukhopadhyay, Abhiroop, 2015. "Income Guarantees and Borrowing in Risky Environments: Evidence from India's Rural Employment Guarantee Scheme," IZA Discussion Papers 9357, Institute of Labor Economics (IZA).
    10. repec:zbw:diestu:91 is not listed on IDEAS
    11. Deininger,Klaus W. & Nagarajan,Hari Krishnan & Singh,Sudhir K. & Deininger,Klaus W. & Nagarajan,Hari Krishnan & Singh,Sudhir K., 2016. "Short-term effects of India's employment guarantee program on labor markets and agricultural productivity," Policy Research Working Paper Series 7665, The World Bank.
    12. Gehrke, Esther, 2015. "Can public works infrastructure affect employment outcomes? Evidence from the NREGS in India," Discussion Papers 9/2015, German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE).
    13. Fetzer, Thiemo, 2019. "Can Workfare Programs Moderate Conflict? Evidence from India," The Warwick Economics Research Paper Series (TWERPS) 1220, University of Warwick, Department of Economics.
    14. Loewe, Markus, 2016. "Social protection: A key instrument for social, economic and political development," PEGNet Policy Briefs 7/2016, PEGNet - Poverty Reduction, Equity and Growth Network, Kiel Institute for the World Economy (IfW).
    15. Bhargava, Anil K., 2015. "NREGA's Impact on Agricultural Production, Labor, and Technology Adoption: New Evidence from a Detailed Indian Household-Plot Panel," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205695, Agricultural and Applied Economics Association.

    More about this item

    Keywords

    uncertainty; employment guarantee; crop choice;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bav:wpaper:152_gehrke. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Frederik Wiynck). General contact details of provider: http://edirc.repec.org/data/vierlde.html .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.