Impact Evaluation of National Rural Employment Guarantee Scheme in India

This study aims to thoroughly evaluate the impacts of India’s National Rural Employment Guarantee Scheme (NREGS), the largest public works project in the world. NREGS was started in 2006, following the 2005 Act that provides each rural household with a legal right to be employed up to 100 days per year at state-level minimum wage rate. NREGS has the following characteristics. First, it is demand-driven. Second, all rural households are eligible for NREGS and self-selection is the major mechanism to target the poor. Third, NREGS offers equal wage rates to women for the same work as men and makes payment directly to the individual workers. Fourth, NREGS projects are selected at the local level.

View more We aim to explore the following research questions:

1. Targeting and Implementation

How well does NREGS target its intended group? Are the poor (non-poor) self-selecting into (out of) the program, as intended?
2. Partial equilibrium effects
How does NREGS affect the labor allocation, migration, and welfare of its participants? Does participation in NREGS work “crowd out” participants’ labor supply for other purpose such as working on their own or neighbors’ fields?

3. General equilibrium effects and income distributional effects
What are the general equilibrium effects? And what are the distributional effects of NREGS over different types of households such as land owners, laborers, etc.?

4. Gender-specific effects
What are the gender-specific effects? We aim to provide evidence on the magnitude of economic and non-economic benefits derived by females in different income groups from NREGS and the mechanisms that may underlie such effects.

We use two existing data sets: a three-round (2004, 2006, and 2008) panel data set from 4,800 households in Andhra Pradesh and the National Sample Survey data which are collected annually and cover all districts in India.

To examine partial equilibrium effects, we compare NREGS participants with non-participants. Methodologically, we use propensity score matching, double (or triple) differences, and instrumental variable methods. To examine general equilibrium effects (or spillover effects), we explore the phase-in structure of NREGS implementation to compare non-participants in the treatment areas with non-participants in the control areas, using propensity score matching and double (or triple) differences.

The panel data will allow us to control for observed confounding factors, and to examine heterogeneous impacts due to initial conditions. Propensity score matching and instrumental variable methods are used to deal with the selection bias due to non-random program placement and self-selection of program participation.

Research Findings

Employment Guarantee for Women in India Evidence on Participation and Rationing in the MGNREGA from the National Sample Survey

The Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), which guarantees employment of every rural household for 100 days, has different progressive provisions which incentivise higher participation of women in the programme. Official data suggest that 47% of all MGNREGA workers are women. This paper uses the National Sample Survey for the 68th employment-unemployment round (2011-12) to examine the performance of states in terms of participation and rationing of women in the programme relative to that of men. In addition, it documents these indicators from various sub-populations of women, including widows, mothers of young children, etc. who typically face serious constraints in the context of labour market participation.The study finds substantial variations both across states and sub populations implying the need for a differentiated policy focus across states to support women's access to and participation in the MGNREGA.



The Political Economy of MGNREGS Spending in Andhra Pradesh

Are ostensibly demand-driven public programs less susceptible to political clientelism even when private goods are allocated? We investigate this conjecture using expenditure data at the local level from India's National Rural Employment Guarantee Scheme. By focusing on one state where accountability and transparency mechanisms have been employed and implementation efforts have been applauded, we do not find evidence of blatant vote buying before the 2009 election but do find that patronage played a small part in fund distribution after the 2009 election. Indeed most variation in expenditures is explained by the observed needs of potential beneficiaries, as the scheme intended.



BLOG POST Welfare and Poverty Impacts of India’s National Rural Employment Guarantee Act: Evidence from Andhra Pradesh

This post was authored by Yanyan Liu from the International Food Policy Research Institute (IFPRI) and Klaus Deininger from the World Bank. They are currently conducting research on the poverty and welfare impacts of one of India’s largest public works programs, the National Rural Employment Guarantee Act. They share some initial findings from their research below


Public works programs are gaining in popularity as governments seek more effective ways of battling extreme poverty and gender-based income inequality. Establishing such programs as a type of social safety net allows governments to set balanced wages while at the same time investing in infrastructure that will further their country’s economic growth down the road.

Photo: Alina Paul-Bossuet (ICRISAT)

In 2005, the Government of India passed the National Rural Employment Guarantee Act (NREGA), which was enacted to provide a least one hundred days of guaranteed wage employment in every financial year to every household whose adult members volunteer to do unskilled labor. However, NREGA, like many public works programs, is bound to face challenges in the form of high administrative and logistical requirements and potential corruption. Evaluative research looking at the effectiveness of this program sought to determine if the NREGA’s benefits outweighed its potential pitfalls.

To this end, our recent International Food Policy Research Institute (IFPRI) study in collaboration with the World Bank and International Initiative of Impact Evaluation (3ie), looked at the impact of NREGA on the short- and medium-term welfare and poverty effects of participating communities (Andhra Pradesh). Using a three-round, 4,000-household panel in Andhra Pradesh together with administrative data on NREGA participation, the households were randomly sampled from five districts in Andhra Pradesh in 2004, 2006, and 2008, respectively.

We find that the program is well-targeted in Andhra Pradesh and has had impacts higher than the amount of the program’s direct cash transfer. While short-term effects are higher in terms of participants’ nutritional intake, in the medium-term, we see increased accumulation of non-financial assets. Both short- and medium-term benefits seem to accrue more to participants in the scheduled castes and tribes, as well as to those who would otherwise rely on casual labor.

Importantly, we do not find evidence that the NREGA program discourages other forms of employment; which program critics have often suggested. In fact, we find that in Andhra Pradesh, increased expenditures on the NREGA program translate almost directly into an increase in additional employment opportunities. Our results also suggest that investments in land improvement are occurring on participant’s fields. This finding suggests that NREGS is likely to have a long-run effect on land productivity.

While our findings suggest that NREGA does have significant positive impacts, it must be noted that this study looked at one of India’s better-performing states. Further studies should expand this research to look at other states with weaker implementation records; this would allow researchers and policymakers not only to better understand the program’s overall impacts but also to identify specific implementation strategies that would improve the program’s success rate throughout the country as a whole.