COVID-19 disaster and employment generation program in a developing economy

Area of Science:

• Development Economics
• Labor Economics
• Public Policy

Background:

• Covid-19 induced significant reverse migration of labor to rural areas.
• Employment generation programs were implemented as a policy response.
• The effectiveness and welfare implications of these programs require analysis.

Purpose of the Study:

• To analyze the failure of rural employment generation programs in response to Covid-19 induced reverse migration.
• To evaluate the impact of different program implementation modes on unemployment and welfare.
• To identify conditions under which such programs may become counterproductive.

Main Methods:

• Development of a three-sector Harris-Todaro (HT)-type model for a developing economy.
• Distinction between two alternative modes of program implementation.
• Welfare measurement using Sen's inequality-sensitive index.
• Construction of numerical examples to validate conditions for counterproductive outcomes.

Main Results:

• A policy solely targeting unemployment reduction fails, increasing unemployment and worsening welfare.
• Policies combining rural infrastructure development and employment creation may not worsen social welfare.
• Rural employment programs can be counterproductive if the urban region is more labor-abundant than the rural region.

Conclusions:

• The design and implementation strategy of rural employment programs are critical for their success.
• Focusing solely on reducing unemployment can lead to adverse outcomes.
• A composite policy approach is advocated to minimize the negative impacts of the Covid-19 disaster and improve welfare.