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Impact of Public Works on Household Occupational Choice Evidence from NREGS in India

Sinduja Srinivasan

No WR-1053, Working Papers from RAND Corporation

Abstract: I analyze the impact of India's public employment generation program (NREGS) on entrepreneurship. One of the main barriers to entrepreneurship in India is a lack of access to capital. My hypothesis is that NREGS allows liquidity constrained individuals to accumulate savings, enabling subsequent investment in a risky, but more profitable, venture, and ideally, permanent graduation from poverty. Taking advantage of the quasi-experimental nature of the program, I use a nationally representative data set to estimate the impact of NREGS on selection into entrepreneurship. I find that rates of non-agricultural entrepreneurship increase by 3 percentage points in NREGS districts (increasing rates from 15% to 18%), compared to areas that did not receive the program. This result is robust to various specifications, including two falsification tests. The results suggest that by acting as a source of credit, NREGS impacts household occupational choice, contributing to increased income, and ultimately promoting current and future family welfare.

Pages: 42 pages
Date: 2014-09
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