An Employment Guarantee as Risk Insurance? : Assessing the Effects of the NREGS on Agricultural Production Decisions
Uninsured risk constrains households in their production decisions in many developing countries. Similarly to crop insurance, employment guarantees can support farmers in managing agricultural production risks. Evidence from representative panel da...
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/389031490723477182/An-employment-guarantee-as-risk-insurance-assessing-the-effects-of-the-NREGS-on-agricultural-production-decisions http://hdl.handle.net/10986/26354 |
| Summary: | Uninsured risk constrains households in
their production decisions in many developing countries.
Similarly to crop insurance, employment guarantees can
support farmers in managing agricultural production risks.
Evidence from representative panel data of Andhra Pradesh,
India, suggests that the National Rural Employment Guarantee
Scheme (NREGS) reduces households' uncertainty about
future income streams because it provides employment
opportunities in rural areas independently of weather shocks
and crop failure. Because the NREGS makes an ex-post labor
supply response to agricultural shocks more efficient,
households with access to the NREGS can shift their
production towards riskier but also more profitable crops.
The observed shifts in agricultural production do
considerably raise the profitability of agricultural
production and hence the incomes of smallholder farmers. The
findings are not driven by changes in the labor or cost
intensity of those crops, which supports the idea that the
causal mechanism underlying the observed changes is indeed
an insurance effect. |
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