Article Contents
Lahiri, B. (2026). Credit Constraints and Labor Availability: Effects of MGNREGA on Household Income Diversification Across Microenterprise and Livestock Ownership. Ecofunomics, 8(1), A5.
Abstract
Households diversify income through activities that differ in required input intensities. When a policy shock alters households’ available endowments, it can change the composition across these activities. While existing literature typically examines how changes in a single input, such as capital or labor, affect participation in a specific activity like entrepreneurship, this study considers the MGNREGA work-for-wage policy that simultaneously affects both credit access and labor availability. Such a policy is expected to shift households’ allocation between labor-intensive and capital-intensive activities. By relaxing credit constraints while reducing the labor availability for other income-smoothing pursuits, the policy is predicted to decrease engagement in labor-intensive microenterprises and increase participation in livestock ownership, a relatively capital-intensive activity. This theoretical prediction is consistent with the intuition of the Rybczynski theorem from international trade. Using IHDS data, the empirical analysis implementing a system of equations approach supports these expectations, with results remaining robust across alternative specifications.
Keywords: Credit constraint, Labor availability, MGNREGA, Household income diversification, Microentrepreneurship, Livestock ownership, Rybczynski theorem
JEL codes: D13, J22, J43, Q12, H53
Author
Spears School of Business, Oklahoma State University, USA.
Ecofunomics is a UGC CARE standard, peer-reviewed journal, committed to maintaining high academic and editorial standards. We invite researchers, academicians, and scholars to submit their manuscripts for Volume 8, Issue 1.
The journal enjoys a global readership spanning 168 countries and ensures wide research visibility through Google Scholar indexing and DOI assignment for all published articles. We welcome original and impactful research contributions from diverse disciplines.
