Does Providing Public Works Increase Workers' Wage Bargaining Power in Private Sectors? -- Evidence from National Rural Employment Guarantee Scheme in India

This paper answers the question that, does having some household members working in public work program increase other household members' wage bargaining power in private sectors? we use DID matching method to estimate NREGS's effect on participating households' labor market outcomes. Results show that non-participants from participating households (i.e. households with at least one person participating in the program) receive a 5\% wage increase compared to individuals from non-participating households. This result is consistent with a unitary household utility model and wage bargaining story. Intuitively, when a household participates in the program, the benefit obtained from this program may transmit from participants to household non-participants, hence leading to a higher reservation wage for the latter. This wage effect only exists in Karif season, an agricultural busy season. %Relevant to gender and inequality literature, we find the effects are usually greater in magnitude for female than for male workers. This is consistent with the initial goal of this program, i.e. empowering women.

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 Record created 2017-04-01, last modified 2019-08-26

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