Spatially heterogeneous effects of a public works program

Joshua D. Merfeld
Journal of Development Economics, Journal of Development Economics, 136 (2019), pp.151-167

Most research on labor market effects of the Mahatma Gandhi National Rural Employment Guarantee Scheme focuses on outcomes at the district level. This paper shows that such a focus masks substantial spatial heterogeneity: treated villages located near untreated areas see smaller increases in casual wages than treated villages located farther from untreated areas. Spatial differences in implementation or program leakages do not appear to drive this spatial heterogeneity. The effects of the program on private-sector employment display similar intra-district heterogeneity and these effects on employment are highly correlated with the effect on wages. Overall, these results suggest that worker mobility leads a district-level focus to underestimate the true effect of the program on wages. Quantifying this underestimate using two separate methods produces very similar results; the overall effect on wages appears to be approximately twice as large as district-level estimates suggest.

Wagner Faculty