Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee

We estimate the effect of a large rural workfare program in India on private employment and wages by comparing trends in districts that received the program earlier relative to those that received it later. Our results suggest that public sector hiring crowded out private sector work and increased private sector wages. We compute the implied welfare gains of the program by consumption quintile. Our calculations show that the welfare gains to the poor from the equilibrium increase in private sector wages are large in absolute terms and large relative to the gains received solely by program participants. (JEL I38, J31, J45, J68, O15)