Despite evidence of increasing household wages, anti-poverty schemes in India can have an adverse effect by lowering human capital investment
Read “Workfare and Human Capital Investment: Evidence from India” by Manisha Shah and Bryce Millet Steinberg here.
Workfare schemes, designed as an alternative to more traditional social benefit programmes, are increasingly popular in developing countries. India’s National Rural Employment Guarantee Scheme (NREGS), one of the world’s largest workfare programmes, has been celebrated for leading to increased wages in rural areas. Yet research by Bryce Millet Steinberg and Manisha Shah finds that the programme has unintended consequences for children. In this VoxDevTalk, Steinberg discusses how the research team used multiple household surveys to uncover how the scheme’s promise of wages leads to increased labour demand. In turn, this increases the opportunity cost of remaining in school, with particularly large consequences for adolescents. These findings suggest the value of pairing workfare programmes with complementary policies to incentivise human capital investment.