Why Guarantee Employment? Evidence from a Large Indian Public-Works Program

Most countries implement safety net programs for poor households. A widespread concern is that such programs crowd out private-sector jobs, but they could also affect workers’ job choice. This paper analyzes the first-year employment impacts of the world’s largest public-works program, India’s National Rural Employment Generation Scheme (NREGS), using a novel regression-discontinuity design. It focuses on districts treated in phase 2 of the NREGS rollout, which excludes poorer districts that were already treated. The results show that there is little evidence of a crowding out of private-sector jobs. Instead, male workers move from work for pay to family employment, which is driven by smallholder farmers.