Panel Paper:
Spatially Heterogeneous Effects of a Public Works Program
Saturday, November 4, 2017
Burnham (Hyatt Regency Chicago)
*Names in bold indicate Presenter
Most research on the labor market effects of the Mahatma Gandhi National Rural Employment Guarantee Scheme focuses on outcomes at the district level. In this paper, I show that such a focus masks substantial spatial heterogeneity: treated villages located near untreated districts see smaller increases in casual wages than treated villages located farther from untreated districts. In fact, while there is a large wage increase towards the interior of treated districts, the effect of the program completely disappears at the border of treated and untreated districts. In addition, I present suggestive evidence that this spatial heterogeneity is driven by worker mobility rather than program leakage or pre-program trends. I then demonstrate that while there is no effect of the program on overall private-sector employment at the district level, a district-level focus again obscures intra-district heterogeneity. Finally, by exploiting the difference in wage changes over space, I estimate that increases in consumption are driven predominately by the increase in wages, as opposed to work available through the program itself. A back-of-the-envelope calculation suggests that almost 80 percent of consumption gains are attributable to the wage increase, while only 20 percent of the gains are attributable to direct program employment. These results support the argument that increasing prevailing rural wages is an effective poverty-fighting tool in developing countries.
