Supply variabilities in public workfares

Girish Bahal, Anand Shrivastava

Research output: Contribution to journalArticlepeer-review

Abstract

This paper presents a model of the labor market where public workfares increase private wages by reducing labor supply. In a dynamic setting, we show that when wages are downwardly rigid, forward-looking employers optimally compress wage increases in response to intertemporal variability in the level of program implementation. The model generates two key predictions: greater variability in program provision results in a larger compression of wage increases, and compression of wage increases is more severe under low inflation. We empirically verify these predictions using data from two large workfares from India.

Original languageEnglish
Article number102608
JournalJournal of Development Economics
Volume150
DOIs
Publication statusPublished - May 2021

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