The Spillover Effects of Public Works on Migration, Labor Allocation and Wages: Evidence from National Rural Employment Guarantee Act, India
*Names in bold indicate Presenter
This analysis builds a simple time allocation model for households in non-program districts with an outside option of migrating or commuting to a neighboring NREGA district. This model predicts that in non-program districts, private wages rise and average non-labor force participation decreases with increasing exposure intensity. This model’s predictions are tested using a nationally representative employment survey and spatial data capturing distance and thus, intensity of exposure to NREGA for non-program districts.
Combined with migration information, it is demonstrated that short-term out-migration from non-program districts was driven by cost of migrating to a NREGA neighbor. Exploiting the shock to exposure intensity due the program’s staggered rollout and spatial variation in district boundaries, the spillover effects of NREGA on casual wages and individual and household level labor market outcomes in non-program districts are then estimated. Our primary results show that average time allocated to non-labor force participation decreased by 1.8 percentage points in districts surrounded by NREGA neighbors, as compared to districts with no NREGA neighbors. The real casual wage is also estimated to have increased by 6.8%, thus providing support for theoretical predictions.