General Equilibrium Effects of (Improving) Public Employment Programs: Experimental Evidence from India

Karthik Muralidharan, Paul Niehaus and Sandip Sukhtankar

No 23838, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: D50 D73 H53 J38 J43 O18 (search for similar items in EconPapers)
Date: 2017-09
New Economics Papers: this item is included in nep-exp and nep-lma
Note: DEV LS PE POL
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Published as Karthik Muralidharan & Paul Niehaus & Sandip Sukhtankar, 2023. "General Equilibrium Effects of (Improving) Public Employment Programs: Experimental Evidence From India," Econometrica, Econometric Society, vol. 91(4), pages 1261-1295, July.

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