I analyze the impact of India's public employment generation program (NREGS) on entrepreneurship. One of the main barriers to entrepreneurship in India is a lack of access to capital. My hypothesis is that NREGS allows liquidity constrained individuals to accumulate savings, enabling subsequent investment in a risky, but more profitable, venture, and ideally, permanent graduation from poverty. Taking advantage of the quasi-experimental nature of the program, I use a nationally representative data set to estimate the impact of NREGS on selection into entrepreneurship. I find that rates of non-agricultural entrepreneurship increase by 3 percentage points in NREGS districts (increasing rates from 15% to 18%), compared to areas that did not receive the program. This result is robust to various specifications, including two falsification tests. The results suggest that by acting as a source of credit, NREGS impacts household occupational choice, contributing to increased income, and ultimately promoting current and future family welfare.
Srinivasan, Sinduja, Impact of Public Works on Household Occupational Choice: Evidence from NREGS in India. Santa Monica, CA: RAND Corporation, 2014. https://www.rand.org/pubs/working_papers/WR1053.html.
Srinivasan, Sinduja, Impact of Public Works on Household Occupational Choice: Evidence from NREGS in India, Santa Monica, Calif.: RAND Corporation, WR-1053, 2014. As of October 06, 2021: https://www.rand.org/pubs/working_papers/WR1053.html