8. The Effect of Employment Guarantee Scheme on School Attendance in Rural India

The National Rural Employment Guarantee Act in India guarantees 100 days of wage employment per year to rural households. A burgeoning literature documents how the employment guarantee scheme has affected different aspects of rural economy like poverty alleviation, rural asset creation, and rural–urban migration. This paper contributes to this literature by studying the effect of the scheme on educational outcomes of households who work under the scheme. The paper estimates the effect of employment guarantee scheme on school attendance of 14–17-years-old boys in India. Using data from a nationally representative household survey, we compare the educational outcomes of two types of rural households—(1) households that applied for work under the scheme and obtained work and (2) households that applied for work under the scheme but didn’t obtain work. We find that a household’s work in the scheme reduces the probability that a 14–17-years-old male household member attends school by 14%. Estimation using an older subsample of boys who attended school before the implementation of the scheme shows that the negative effect is not driven by unobserved household heterogeneity that affects both school attendance and work in the scheme. The results indicate that a well-intended employment guarantee scheme can have a perverse effect with long-term consequence for the beneficiaries and the economy as a whole.