Land Inequality and Workfare Policies

This paper contributes to the relatively scant literature on the impacts of inequality on the efficacy of public works programmes. We study this in the context of India. In particular, we examine the effect of land inequality on the implementation of the world’s largest workfare programme – the National Rural Employment Guarantee Act (NREGA). Our OLS estimates demonstrate that the concentration of land ownership reduces the efficacy of NREGA. An instrumental variable (IV) analysis, where we use the historical land tenure system as an IV for contemporaneous land inequality, further corroborates our findings. This negative relationship is consistent with the hypothesis that public work schemes raise agricultural wages in the private labour market, thereby incentivising big landlords to use their political power to oppose such programmes. We exclude the possibility that the higher provision of public jobs in more equal areas is driven by a higher demand for public jobs or by caste or religious differences. This study suggests that the concentration of land ownership, a proxy for power asymmetries, could hinder effective implementation of development policies.