Working Paper: NBER ID: w23838
Authors: Karthik Muralidharan; Paul Niehaus; Sandip Sukhtankar
Abstract: Public employment programs may affect poverty both directly through the income they provide and indirectly through general-equilibrium effects. We estimate both effects, exploiting a reform that improved the implementation of India’s National Rural Employment Guarantee Scheme (NREGS) and whose rollout was randomized at a large (sub-district) scale. The reform raised beneficiary households’ earnings by 14%, and reduced poverty by 26%. Importantly, 86%of income gains came from non-program earnings, driven by higher private-sector (real) wages and employment. This pattern appears to reflect imperfectly competitive labor markets more than productivity gains: worker’s reservation wages increased, land returns fell, and employment gains were higher in villages with more concentrated landholdings. Non-agricultural enterprise counts and employment grew rapidly despite higher wages, consistent with a role for local demand in structural transformation. These results suggest that public employment programs can effectively reduce poverty in developing countries, and may also improve economic efficiency.
Keywords: Public Employment Programs; Poverty Reduction; Labor Markets; India; NREGS
JEL Codes: D50; D73; H53; J38; J43; O18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improved NREGS implementation via biometric smartcards (H55) | Increased beneficiary households' earnings (H53) |
| Increased beneficiary households' earnings (H53) | Reduced poverty (I32) |
| Improved NREGS implementation via biometric smartcards (H55) | Increased market wages (J39) |
| Increased market wages (J39) | Increased beneficiary households' earnings (H53) |
| Improved NREGS implementation via biometric smartcards (H55) | Higher private-sector real wages and employment (J39) |
| Increased reservation wages in treated areas (J39) | Enhanced bargaining power for workers (J52) |
| Improved NREGS implementation via biometric smartcards (H55) | Increased non-agricultural employment (J68) |
| Improved NREGS implementation via biometric smartcards (H55) | Increased enterprise counts (P12) |
| Increased enterprise counts (P12) | Increased non-agricultural employment (J68) |
| Improved NREGS implementation via biometric smartcards (H55) | Improved economic efficiency (D61) |