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

Karthik Muralidharan, Paul Niehaus, Sandip Sukhtankar

NBER Working Paper No. 23838
Issued in September 2017, Revised in January 2018
NBER Program(s):Development Economics, Labor Studies, Public Economics, Political Economy

A public employment program's effect on poverty depends 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 employment guarantee. Without changing government expenditure, this reform raised low-income households' earnings by 13%, driven primarily by market earnings. Real wages rose 6% while days without paid work fell 7%. Effects spilled over across sub-district boundaries, and adjusting for these spillovers substantially raises point estimates. The results highlight the importance and feasibility of accounting for general equilibrium effects in program evaluation.

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Document Object Identifier (DOI): 10.3386/w23838

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