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Short-term effects of India's employment guarantee program on labor markets and agricultural productivity

Klaus W. Deininger, Hari Krishnan Nagarajan, Sudhir K. Singh, Klaus W. Deininger, Hari Krishnan Nagarajan and Sudhir K. Singh
Authors registered in the RePEc Author Service: Sudhir K. Singh () and Klaus W. Deininger

No 7665, Policy Research Working Paper Series from The World Bank

Abstract: This paper uses a large national household panel from 1999/2000 and 2007/08 to analyze the short-term effects of India's Mahatma Gandhi National Rural Employment Guarantee Scheme on wages, labor supply, agricultural labor use, and productivity. The scheme prompted a 10-point wage increase and higher labor supply to nonagricultural casual work and agricultural self-employment. Program-induced drops in hired labor demand were more than outweighed by more intensive use of family labor, machinery, fertilizer, and diversification to crops with higher risk-return profiles, especially by small farmers. Although the aggregate productivity effects were modest, total employment generated by the program (but not employment in irrigation-related activities) significantly increased productivity, suggesting alleviation of liquidity constraints and implicit insurance provision rather than quality of works undertaken as a main channel for program-induced productivity effects.

Keywords: Employment and Unemployment; Labor Markets; Climate Change and Agriculture; Crops and Crop Management Systems; Rural Labor Markets (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr and nep-dev
Date: 2016-05-09
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