Workfare and Human Capital Investment

Abstract

We examine the impact of an increase in the demand for low-skill labor caused by a large public works program (NREGS) on schooling outcomes. Exploiting the staged rollout of the program for causal identification, we show exposure to workfare decreases enrollment by 1–3.5 percentage points and increases labor by four percentage points among adolescents, with girls primarily substituting into unpaid domestic work. We also find evidence that children exposed to the program in utero to age four benefit later in life. We conclude that the opportunity cost of schooling is an important determinant of educational investment.