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Equilibrium Distributional Impacts of Government. Employment Programs: Evidence from India's Employment Guarantee

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  • Clément Imbert

    (PSE - Paris School of Economics, PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

  • John Papp

    (Princeton University)

Abstract

This paper presents evidence on the equilibrium labor market impacts of a large rural workfare program in India. We use the gradual roll out of the program to estimate changes in districts that received the program earlier relative to those that received it later. Our estimates reveal that following the introduction of the program, public employment increased by .3 days per prime-aged person per month (1.3% of private sector employment) more in early districts than in the rest of India. Casual wages increased by 4.5%, and private sector work for low-skill workers fell by 1.6%. These effects are concentrated in the dry season, during which the majority of public works employment is provided. Our results suggest that public sector hiring crowds out private sector work and increases private sector wages. We use these estimates to compute the implied welfare gains of the program by consumption quintile. Our calculations show that the welfare gains to the poor from the equilibrium increase in private sector wages are large in absolute terms and large relative to the gains received solely by program participants. We conclude that the equilibrium labor market impacts are a first order concern when comparing workfare programs with other anti-poverty programs such as a cash transfer.

Suggested Citation

  • Clément Imbert & John Papp, 2012. "Equilibrium Distributional Impacts of Government. Employment Programs: Evidence from India's Employment Guarantee," PSE Working Papers halshs-00680451, HAL.
  • Handle: RePEc:hal:psewpa:halshs-00680451
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00680451
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    References listed on IDEAS

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    1. Datt, Gaurav & Ravallion, Martin, 1994. "Transfer Benefits from Public-Works Employment: Evidence for Rural India," Economic Journal, Royal Economic Society, vol. 104(427), pages 1346-1369, November.
    2. 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.
    3. Raghav Gaiha & Vani Kulkarni & Manoj Pandey & Katsushi Imai, 2009. "National rural employment guarantee scheme, poverty and prices in rural India," The School of Economics Discussion Paper Series 0908, Economics, The University of Manchester.
    4. Besley, Timothy & Coate, Stephen, 1992. "Workfare versus Welfare Incentive Arguments for Work Requirements in Poverty-Alleviation Programs," American Economic Review, American Economic Association, vol. 82(1), pages 249-261, March.
    5. Cunha, Jesse & De Giorgi, Giacomo & Jayachandran, Seema, 2011. "The Price Effects of Cash Versus In-Kind Transfers," CEPR Discussion Papers 8581, C.E.P.R. Discussion Papers.
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    7. Behrman, Jere R., 1999. "Labor markets in developing countries," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 43, pages 2859-2939 Elsevier.
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    10. Porto, Guido G., 2006. "Using survey data to assess the distributional effects of trade policy," Journal of International Economics, Elsevier, vol. 70(1), pages 140-160, September.
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    Cited by:

    1. 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.
    2. Sen Gupta, Abhijit & Bhattacharya, Rudrani & Rao, Narhari, 2014. "Understanding Food Inflation in India," MPRA Paper 58319, University Library of Munich, Germany.
    3. Abhijit V. Banerjee, 2016. "Policies for a better-fed world," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(1), pages 3-17, February.
    4. Manisha Shah & Bryce Millett Steinberg, 2017. "Drought of Opportunities: Contemporaneous and Long-Term Impacts of Rainfall Shocks on Human Capital," Journal of Political Economy, University of Chicago Press, vol. 125(2), pages 527-561.
    5. Thiemo Fetzer, 2014. "Can Workfare Programs Moderate Violence? Evidence from India," STICERD - Economic Organisation and Public Policy Discussion Papers Series 053, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    6. Narayanamoorthy, A. & Bhattarai, Madhusudan, 2013. "Rural Employment Scheme and Agricultural Wage Rate Nexus: An Analysis across States," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 26(2013).
    7. World Bank, 2014. "More Jobs, Better Jobs : A Priority for Egypt," World Bank Other Operational Studies 20584, The World Bank.
    8. Thiemo Fetzer, 2014. "Can Workfare Programs Moderate Violence? Evidence from India," STICERD - Economic Organisation and Public Policy Discussion Papers Series 53, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    9. Gupta, Bhanu & Mukhopadhyay, Abhiroop, 2016. "Local funds and political competition: Evidence from the National Rural Employment Guarantee Scheme in India," European Journal of Political Economy, Elsevier, vol. 41(C), pages 14-30.
    10. Christopher P Roth, 2014. "Conspicuous Consumption and Peer Effects among the Poor: Evidence From a Field Experiment," CSAE Working Paper Series 2014-29, Centre for the Study of African Economies, University of Oxford.
    11. Rudrani Bhattacharya & Abhijit Sen Gupta, 2015. "Food Inflation in India: Causes and Consequences," Working Papers id:7141, eSocialSciences.
    12. Christopher P. Roth, 2014. "Conspicuous Consumption and Peer Effects among the Poor: Evidence From a Field Experiment," Economics Series Working Papers WPS/2014-29, University of Oxford, Department of Economics.
    13. Abhijit Banerjee, 2015. "Policies for a Better-Fed World," Working Papers id:7623, eSocialSciences.
    14. Erlend Berg & Sambit Bhattacharyya & D Rajasekhar & R Manjula, 2014. "Can Public Employment Schemes Increase Equilibrium Wages? Evidence from a Natural Experiment in India," The Centre for Market and Public Organisation 14/317, Department of Economics, University of Bristol, UK.
    15. Jacoby, Hanan G., 2013. "Food prices, wages, and welfare in rural India," Policy Research Working Paper Series 6412, The World Bank.
    16. Shreyasee Das & Abhilasha Singh, 2013. "The Impact of Temporary Work Guarantee Programs on Children's Education: Evidence from the Mahatma Gandhi National Rural Guarantee Act from India," Working Papers 13-03, UW-Whitewater, Department of Economics.
    17. Liu, Yanyan & Barrett, Christopher B., 2012. "Heterogeneous pro–poor targeting in India’s Mahatma Gandhi National Rural Employment Guarantee Scheme:," IFPRI discussion papers 1218, International Food Policy Research Institute (IFPRI).
    18. Sinduja Srinivasan, 2014. "Impact of Public Works on Household Occupational Choice Evidence from NREGS in India," Working Papers WR-1053, RAND Corporation.
    19. Hanan G. Jacoby, 2016. "Food Prices, Wages, And Welfare In Rural India," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 159-176, January.

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    Keywords

    Workfare; Rural labor markets; Icome redistribution;

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