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The Impact of Indian Job Guarantee Scheme on Labor Market Outcomes: Evidence from a Natural Experiment


  • Azam, Mehtabul

    () (Oklahoma State University)


Public works programs, aimed at building a strong social safety net through redistribution of wealth and generation of meaningful employment, are becoming increasingly popular in developing countries. The National Rural Employment Guarantee Act (NREGA), enacted in August 2005, is one such program in India. This paper assesses causal impacts (Intent-to-Treat) of NREGA on public works participation, labor force participation, and real wages of casual workers by exploiting its phased implementation across Indian districts. Using nationally representative data from Indian National Sample Surveys (NSS) and Difference-in-Difference framework, we find that there is a strong gender dimension to the impacts of NREGA: it has a positive impact on the labor force participation and this impact is mainly driven by a much sharper impact on female labor force participation. Similarly, NREGA has a significant positive impact on the wages of female casual workers-real wages of female casual workers increased 8% more in NREGA districts compared with the increase experienced in non-NREGA districts. However, the impact of NREGA on wages of casual male workers has only been marginal (about 1%). Using data from pre-NREGA period, we also perform falsification exercise to demonstrate that the main conclusions are not confounded by pre-existing differential trends between NREGA and non-NREGA districts.

Suggested Citation

  • 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).
  • Handle: RePEc:iza:izadps:dp6548

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    References listed on IDEAS

    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. Hoddinott, John & Skoufias, Emmanuel, 2004. "The Impact of PROGRESA on Food Consumption," Economic Development and Cultural Change, University of Chicago Press, vol. 53(1), pages 37-61, October.
    4. Staubli, Stefan, 2011. "The impact of stricter criteria for disability insurance on labor force participation," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1223-1235, October.
    5. Guido W. Imbens & Jeffrey M. Wooldridge, 2009. "Recent Developments in the Econometrics of Program Evaluation," Journal of Economic Literature, American Economic Association, vol. 47(1), pages 5-86, March.
    6. Carlo del Ninno & Kalanidhi Subbarao & Annamaria Milazzo, 2009. "How to Make Public Works Work : A Review of the Experiences," World Bank Other Operational Studies 11718, The World Bank.
    7. Brian Bell & Richard Blundell & John Reenen, 1999. "Getting the Unemployed Back to Work: The Role of Targeted Wage Subsidies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 339-360, August.
    8. David Cutler & Winnie Fung & Michael Kremer & Monica Singhal & Tom Vogl, 2010. "Early-Life Malaria Exposure and Adult Outcomes: Evidence from Malaria Eradication in India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 72-94, April.
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    More about this item


    difference-in-difference; intent-to-treat; NREGA; rural India;

    JEL classification:

    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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