This paper provides some of the first evidence that rural development policies can have fundamental effects on the reallocation of labor between rural and urban areas. It studies the spillover effects of the world's largest rural workfare program, India's rural employment guarantee. The paper finds that the workfare program has substantial consequences: it reduces short-term (or seasonal) migration to urban areas by 9% and increases wages for manual, short-term work in urban areas by 6%. The implied elasticity of unskilled wages with respect to short-term migration is high (-0.7).
URL : 20170505021352.pdf