How Competitive Labor Markets and Local Demand Drive Poverty Reduction and Economic Efficiency
General Equilibrium Effects of (Improving) Public Employment Programs: Experimental Evidence From India
Public employment programs, like India’s National Rural Employment Guarantee Scheme (NREGS), can reduce poverty directly by increasing household income and indirectly through broader economic effects. Researchers studied a reform that improved NREGS implementation and found that it raised beneficiary earnings by 14%, leading to a 26% reduction in poverty. Most income gains came from non-program sources, driven by higher private-sector wages and employment. This suggests that competitive labor markets and increased local demand play key roles in poverty reduction and economic efficiency.
