Income Gains for the Poor from Public Works Employment: Evidence for Two Indian Villages Book

Current knowledge provides little guidance on one of the key issues in evaluating workfare schemes: What are the net income gains to participants? This paper offers an answer for rural public employment in the state of Maharashtra in India. An econometric model of intra-household time allocation is proposed, and the paper offers a consistent estimator, recognizing that the model entails that both regressands and endogenous regressors will be censored. The empirical implementation indicates that workfare projects induce significant behavioral responses, though the predominant time displacement is such that the net income gains remain large. Employment on the projects led to a reduction in poverty, of almost the same magnitude as a uniform and undistorting allocation of the same gross budget.