Man or Machine ? Environmental Consequences of Wage Driven Mechanization in Indian Agriculture

This paper uses an exogenous shock to wages from the world’s largest anti-poverty program to showthat higher wages can lead to increased air pollution, likely by inducing farmers to shift into a labor-saving andmechanized production process. Using a difference-in-differences approach on the staggered roll-outof India’s Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), combined with data on nearly 1million fires, the paper shows that the frequency of agricultural fires increases by 21 percent after the shock.The increase in fires is concentrated in districts that appear more likely to mechanize the harvest. MNREGA did notlead to changes in area planted or tonnage produced in fire intensive crops. The estimates show that nationally, theshock increased the rate of particulate emissions from biomass burning by 30 to 50 percent. The results suggestthat absent policies to correct for environmental externalities of mechanization at all stages of development,labor market shocks may lead to inefficient levels of mechanization.