Supply variabilities in public workfares

Bahal, Girish and Shrivastava, Anand (2021) Supply variabilities in public workfares. Journal of Development Economics, 150. ISSN 0304-3878

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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.

Item Type: Article
Authors: Bahal, Girish and Shrivastava, Anand
Document Language:
Uncontrolled Keywords: Labor market, Wage rigidity, Market power, Public workfare, Wage compression, India
Subjects: Social sciences > Economics
Divisions: Azim Premji University > School of Arts and Sciences
Full Text Status: Restricted
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