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Short-term Migration and Rural Workfare Programs: Evidence from India

We study the effect of a large rural public works program on short-term migration from rural to urban areas in India. Using cross-state variation in public employment provision for identification, we find that participation to the program significantly reduces short-term migration. This has two important implications. First, households who choose to participate in local public works rather than migrating forgo much higher earnings outside the village. We estimate a structural model of migration decisions which suggests the utility cost of migration may be as high as 60% of migration earnings. Second, via its effect on migration, the program has a significant impact on urban labor markets. We use a gravity model to predict migration flows from rural to urban areas and find evidence that urban centers which are more exposed to a reduction of short term migration inflows experience significantly higher wage growth and a slight decline in employment for urban workers.

Download Published: Working Paper       Geography: India