Government Employment Guarantee, Labor Supply, and Firms’ Reaction: Evidence from the Largest Public Workfare Program in the World

Agarwal, S and Alok, S and Chopra, Y and Tantri, P L (2021) Government Employment Guarantee, Labor Supply, and Firms’ Reaction: Evidence from the Largest Public Workfare Program in the World. Journal of Financial and Quantitative Analysis, 56 (2). pp. 409-442. ISSN 0022-1090

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Abstract

Using establishment-level data, we examine the impact of the Indian government’s employment guarantee program on labor and firm behavior. We exploit the staggered implementation of the program for identification and find that the program led to a 10% reduction in the permanent workforce in firms. Firms responded to the adverse labor-supply shock by resorting to increased mechanization. This significantly increased the firms’ cost of production, leading to a decline in net profits and productivity. These effects manifested primarily in firms paying low wages, firms having low labor productivity and greater sales volatility, and firms located in states with pro-employer labor regulations.

Affiliation: Indian School of Business
ISB Creiators:
ISB Creators
ORCiD
Alok, S
UNSPECIFIED
Tantri, P L
UNSPECIFIED
Item Type: Article
Uncontrolled Keywords: Workfare, Labor Markets, Labor Supply, Labor Scarcity, Capital Investments, Labor and Finance
Subjects: Finance
Depositing User: Gurusrinivasan K
Date Deposited: 01 Apr 2021 04:31
Last Modified: 01 Apr 2021 04:31
URI: https://eprints.exchange.isb.edu/id/eprint/1427
Publisher URL: https://doi.org/10.1017/S0022109020000186
Publisher OA policy: https://v2.sherpa.ac.uk/id/publication/1618
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