Workfare and Human Capital Investment: Evidence from India

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I EIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. We examine the effect of India's National Rural Employment Guarantee Scheme (NREGS), one of the largest workfare programs in the world, on human capital investment. Since NREGS increases labor demand, it could increase the opportunity cost of schooling, lowering human capital investment even as incomes increase. We exploit the staged rollout of the program across districts for causal identification. Using a household survey of test scores and schooling outcomes for approximately 2.5 million rural children in India, we show that each year of exposure to NREGS decreases school enrollment by 2 percentage points and math scores by 2% of a standard deviation amongst children aged 13-16. In addition, while the impacts of NREGS on human capital are similar for boys and girls, adolescent boys are primarily substituting into market work when they leave school while adolescent girls are substituting into unpaid domestic work. We find mixed results for younger children. We conclude that anti-poverty programs which raise wages could have the unintended effect of lowering human capital investment.JEL Classification: O12, I2, I38, J1

Moving Up or Just Surviving? Nonfarm Self‐Employment in India

“…I add to the NREGS literature by documenting effects on one type of labor—nonfarm self‐employment—as well as showing that these effects appear to be driven by the general equilibrium wage increase and risk reduction effects of the program, not by direct program employment. This finding also supports other research that finds a substantial reallocation of labor following implementation of the program (Islam and Sivasankaran 2014; Shah and Steinberg 2015). In addition, the current results suggest the program plays an important role in helping households manage and cope with production risks, which complements similar findings in the literature (Gehrke 2014; Zimmermann 2018).…”

Start What You Finish! Ex Ante Risk and Schooling Investments in the Presence of Dynamic Complementarities

“…As documented by Shah and Steinberg (2015) the resulting increase in wages did pull more women into the labor force and reduced the time women spent on household chores. Due to intra-household substitution in home production, this also raised the opportunity costs of time for girls and reduced the time they spent in school.…”

“…Shah and Steinberg (2015) and Li and Sekhri (2013) find negative effects of the NREGS on the time girls spend in school using the rolled phase-in of NREGS as a source of variation. It is argued that the NREGS increased the opportunity costs of time of adolescents and therefore led them to drop out of school at younger ages.…”

Political Reservation and Female Labor Force Participation in Rural India

“…Second, by providing a predictable source of income, it helped reduce seasonal short-term migration (Imbert and Papp 2015b), encouraged diversification of cropping patterns (Gehrke 2017), and improved agricultural productivity (Deininger et al 2016). Finally, as the program is self-targeting, distributional effects have been largely positive: NREGS enhanced consumption (Bose 2017) and asset accumulation by the poor (Deininger and Liu 2013), affecting health (Ravi and Engler 2015), primary school participation (Islam and Sivasankaran 2015), learning outcomes in primary (Mani et al 2014), though not secondary schools (Shah and Steinberg 2015), gender-based violence (Amaral et al 2015), and female empowerment (Afridi et al 2016).…”