Econometrica

Journal Of The Econometric Society

An International Society for the Advancement of Economic
Theory in its Relation to Statistics and Mathematics

Edited by: Guido W. Imbens • Print ISSN: 0012-9682 • Online ISSN: 1468-0262

Econometrica: Jul, 2023, Volume 91, Issue 4

General equilibrium effects of (improving) public employment programs: experimental evidence from India

https://doi.org/10.3982/ECTA18181
p. 1261-1295

Karthik Muralidharan, Paul Niehaus, Sandip Sukhtankar

Public employment programs may affect poverty both directly through the income they provide and indirectly through general equilibrium effects. We estimate both effects, exploiting a reform that improved the implementation of India's National Rural Employment Guarantee Scheme (NREGS) and whose rollout was randomized at a large (sub‐district) scale. The reform raised beneficiary households' earnings by 14%, and reduced poverty by 26%. Importantly, 86% of income gains came from non‐program earnings, driven by higher private‐sector (real) wages and employment. This pattern appears to reflect imperfectly competitive labor markets more than productivity gains: worker's reservation wages increased, land returns fell, and employment gains were higher in villages with more concentrated landholdings. Non‐agricultural enterprise counts and employment grew rapidly despite higher wages, consistent with a role for local demand in structural transformation. These results suggest that public employment programs can effectively reduce poverty in developing countries, and may also improve economic efficiency.


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Supplemental Material

Supplement to "General equilibrium effects of (improving) public employment programs: experimental evidence from India"

Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar

Data and Programs

Supplement to "General equilibrium effects of (improving) public employment programs: experimental evidence from India"

Karthik Muralidharan, Paul Niehaus, and Sandip Sukhtankar

Online Appendix