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Welfare Implications of India's Employment Guarantee Programme with a Wage Payment Delay

Author

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  • Basu, Parantap

    (University of Durham)

  • Sen, Kunal

    (University of Manchester)

Abstract

We examine the efficacy of a popular anti-poverty programme, namely the National Rural Employment Guarantee Act (NREGA) of the Government of India. We argue that a chronic friction of wage payment delay in this flagship programme could adversely affect the welfare of the poor through two channels. First, it causes deferred consumption. Second, it turns labour into a credit good which makes an indebted household work harder to clear off his existing debt. The loss of welfare persists even when the worker has an outside employment option. If a programme of financial inclusion increases the indebtedness of the poor, a wage payment delay in the NREGA programme could escalate this welfare loss although the official indicator of success (i.e., participation) may not reveal this friction.

Suggested Citation

  • Basu, Parantap & Sen, Kunal, 2015. "Welfare Implications of India's Employment Guarantee Programme with a Wage Payment Delay," IZA Discussion Papers 9454, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp9454
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    1. Basu, Arnab K. & Chau, Nancy H. & Kanbur, Ravi, 2009. "A theory of employment guarantees: Contestability, credibility and distributional concerns," Journal of Public Economics, Elsevier, vol. 93(3-4), pages 482-497, April.
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    1. Narayanan, Sudha & Das, Upasak & Liu, Yanyan & Barrett, Christopher B., 2017. "The “Discouraged Worker Effect†in public works programs: Evidence from the MGNREGA in India," IFPRI discussion papers 1633, International Food Policy Research Institute (IFPRI).
    2. Kartik Misra, 2022. "No employment without participation: An evaluation of India's employment programme in eastern Uttar Pradesh," Development Policy Review, Overseas Development Institute, vol. 40(6), November.
    3. Li, Yanan & Liu, Yanyan, 2016. "Does Providing Public Works Increase Workers' Wage Bargaining Power in Private Sectors? -- Evidence from National Rural Employment Guarantee Scheme in India," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236181, Agricultural and Applied Economics Association.
    4. Misra, Kartik, 2019. "Does historical land inequality attenuate the positive impact of India’s employment guarantee program?," World Development, Elsevier, vol. 124(C), pages 1-1.
    5. Clive Bell & Abhiroop Mukhopadhyay, 2020. "Income Guarantees and Borrowing in Risky Environments: Evidence from India's Rural Employment Guarantee Scheme," Economica, London School of Economics and Political Science, vol. 87(347), pages 763-812, July.
    6. Narayanan, Sudha & Das, Upasak & Liu, Yanyan & Barrett, Christopher B., 2017. "The “Discouraged Worker Effect” in Public Works Programs: Evidence from the MGNREGA in India," World Development, Elsevier, vol. 100(C), pages 31-44.
    7. Kartik Misra, 2019. "No Employment without Participation : An Evaluation of India's Employment Program in Eastern Uttar Pradesh," UMASS Amherst Economics Working Papers 2019-13, University of Massachusetts Amherst, Department of Economics.

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    More about this item

    Keywords

    NREGA; employment guarantee; credit good; financial inclusion;
    All these keywords.

    JEL classification:

    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • J43 - Labor and Demographic Economics - - Particular Labor Markets - - - Agricultural Labor Markets

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