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

Welfare and Poverty Impacts

In this note, the authors find that in the short-term, participants’ caloric and protein intakes increased, indicating that one of the most important immediate effects of MGNREGS employment is an improvement in participants’ food security and nutrition. Medium-term effects, on the other hand, seem to center around more generalized investments, particularly the accumulation of land. Overall, participants from the scheduled castes and tribes, as well as those who rely on casual labor, benefit most from MGNREGS employment. They also do not find evidence that the MGNREGS program discourages other forms of employment, as has been suggested by the program’s critics. In fact, they find that in Andhra Pradesh, increased expenditures on the MGNREGS program translate almost directly into an increase in additional employment opportunities.