Abstract
We study the effect of a policy in India that offers monetary incentives to inter-caste marriages, in which one of the spouses is of historically disadvantaged castes, i.e., Scheduled Castes, and the other is not. We show that, in theory, the monetary incentives increase the incidence of exogamy, but may reduce the welfare of certain caste or gender. Building on our theoretical analysis, we estimate the effect of the monetary incentives on the incidence of exogamy, the welfare and inter-spousal transfers using National Family and Health Survey data. We find that a 10,000-rupee increase in the incentive raises the exogamy between Scheduled Caste men and non-Scheduled Caste women by 4 percent in rural India; however, we also find that the same increase reduces the welfare of women in rural areas.
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