Short-Term Effects of India's Employment Guarantee Program on Labor Markets and Agricultural Productivity

27 Pages Posted: 17 May 2016 Last revised: 27 Apr 2018

See all articles by Klaus Deininger

Klaus Deininger

World Bank - Development Economics Group (DEC); World Bank - Development Research Group (DECRG)

Hari Nagarajan

Institute of Rural Management Anand (IRMA)

Sudhir Singh

World Bank

Hari Krishnan Nagarajan

affiliation not provided to SSRN

Date Written: May 9, 2016

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

Suggested Citation

Deininger, Klaus and Nagarajan, Hari and Singh, Sudhir and Nagarajan, Hari Krishnan, Short-Term Effects of India's Employment Guarantee Program on Labor Markets and Agricultural Productivity (May 9, 2016). World Bank Policy Research Working Paper No. 7665, Available at SSRN: https://ssrn.com/abstract=2781022

Klaus Deininger (Contact Author)

World Bank - Development Economics Group (DEC) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/kdeininger

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Hari Nagarajan

Institute of Rural Management Anand (IRMA) ( email )

Anand - 388 001
India

HOME PAGE: http://https://www.irma.ac.in/ifaculty/facultydetails.php?fid=428

Sudhir Singh

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Hari Krishnan Nagarajan

affiliation not provided to SSRN

No Address Available

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