Applied Micro Seminar presented by Karthik Muralidharan (UCSD)

General Equilibrium Effects of (Improving) Public Employment Programs: Experimental Evidence from India

The effects of public employment programs on poverty depend on both program earnings and market impacts. We estimate this composite effect, exploiting a large-scale randomized experiment across 157 sub-districts and 19 million people that improved the implementation of India's national rural employment guarantee scheme (NREGS). This improvement raised low-income households' earnings by 13%, with nearly 90% of this gain coming from increases in market earnings. It led to a significant increase in both market wages and private-sector employment. We find an increase in workers' reservation wages consistent with a better-implemented NREGS providing a more credible outside option. We also find evidence consistent with monopsonistic labor markets, which may help explain how wages and employment increased together. Finally, we find positive longer-term effects on credit, private assets, number of enterprises, and non-agricultural employment. Overall, our results suggest that public employment programs can be a highly-effective instrument for reducing poverty in developing countries. 

Papers can be found

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