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.
The authors of this paper find that households participating in the NREGS significantly increase consumption (protein and energy intake) in the short run and accumulate more nonfinancial assets in the medium term. Direct benefits exceed program-related transfers and are most pronounced for scheduled castes and tribes and households supplying casual labor. Asset creation via program-induced land improvements is consistent with a medium-term increase in assets by nonparticipants and increases in wage income in excess of program cost.
In this note, the authors find that overall, poorer households are overwhelmingly more likely to self-select into the program (i.e., seek MGNREGS employment) than better-off households, indicating that the self-targeting design of the program is in and of itself pro-poor. While at the national level, administrative rationing patterns exhibit a bias toward the middle class rather than toward the poor, this varies immensely at the state level. Furthermore, because the self-selection effects generally dominate the rationing effects, the overall result is that MGNREGS targeting is noticeably pro-poor, especially favoring lower caste households. However, female-headed households are less likely to benefit from the pro-gram, due to both lower job-seeking rates and higher levels of administrative rationing than seen for male-headed households.
In this paper, the authors find that at the national level, the self-targeting design of MGNREGS leads to greater rates of self-selection into the program by poorer and scheduled tribe or scheduled caste households. However, the administrative rationing of MGNREGS jobs is not pro-poor but, rather, exhibits a sort of middle-class bias. At the state level, roughly half of 27 states exhibit rationing and participation profiles that signal effective pro-poor targeting. The other half of India’s states struggle to avoid high rates and regressive patterns of administrative rationing of MGNREGS jobs to which the poor have a legal right.