Do Labor Market Interventions Incentivize Technology Adoption? Unexpected Impacts of the World’s Largest Rural Poverty Program

Anil K. Bhargava

Economic Development and Cultural Change, 2023, vol. 71, issue 2, 567 - 620

Abstract: This paper investigates whether higher unskilled agricultural wages attributed to a labor market intervention incentivize farm owners to adopt labor-saving agricultural technology. Using a regression discontinuity design centered on the rollout of India’s National Rural Employment Guarantee in 2006 and detailed agricultural census data, I find 10–25 percentage point shifts away from labor-intensive technologies toward labor-saving ones due to the program. These shifts are driven by India’s smallest farmers and the use of basic technologies that directly replace unskilled labor. Unintended impacts such as these have the potential to shape rural landscapes over time in unexpected ways. Future policies aimed at the poorest segments of the rural population can complement labor market interventions with a renewed focus on high-quality infrastructure and preparation of unskilled workers for higher-value jobs.

Date: 2023
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