The Impact of India's Rural Employment Guarantee on Demand for Agricultural Technology

36 Pages Posted: 7 Jan 2015

See all articles by Anil K. Bhargava

Anil K. Bhargava

University of Michigan at Ann Arbor

Date Written: November 1, 2014

Abstract

The Mahatma Gandhi National Rural Employment Guarantee Act (NREGA) is approaching eight years of implementation. Since 2006, it has offered up to 100 days per year of guaranteed public works employment to tens of millions of rural Indian households. It is intended to augment the purchasing power of the rural poor during droughts and slack agricultural production periods. Given its scale, it has the potential to generate additional ripples throughout the rural economy. Recent working papers have explored NREGA’s effect of higher agricultural wages. This paper investigates whether this increase in the opportunity cost of agricultural labor incentivizes farm owners to adopt labor-saving agricultural technology. Using a regression discontinuity design and new Indian agricultural census data, this paper finds that NREGA causes a shift of roughly 20 percentage points away from labor-intensive technologies toward labor-saving ones, particularly for small farmers and low-powered technologies. This short-run result can lead to a variety of long-run outcomes in technology use, labor markets, and food security. A focus on education, skill development, and quality infrastructure alongside NREGA would augment the chances that the most positive long-run scenario occurs.

Keywords: India, South Asia, Asia, Technology Adoption, Labor Markets, Poverty, Rural Areas, Subsidies, Agricultural Development, Welfare, Employment, Social Protection, Social Safety Nets, Mahatma Gandhi National Rural Employment Guarantee

JEL Classification: H53, J20, O12, O33, Q12

Suggested Citation

Bhargava, Anil K., The Impact of India's Rural Employment Guarantee on Demand for Agricultural Technology (November 1, 2014). IFPRI Discussion Paper 01381 , Available at SSRN: https://ssrn.com/abstract=2523580

Anil K. Bhargava (Contact Author)

University of Michigan at Ann Arbor ( email )

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United States

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