Understanding NREGA: A Simple Theory and Some Facts

Diganta Mukherjee () and Uday Sinha
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Diganta Mukherjee: Indian Statistical Institute

Chapter Chapter 7 in Human Capital and Development, 2013, pp 103-128 from Springer

Abstract: Abstract The government of India has implemented the National Rural Employment Guarantee Act (NREGA) in recent past, to complement the income of the poor by providing them employment for certain number of labour days in a year. In this chapter, using a simple theoretical framework, we have analysed the impact of NREGA scheme on (1) rural labour market, (2) income of the poor households and (3) overall agricultural production. We show that in some situations the poor may exhibit a backward-bending supply curve of labour which may lead to an aggregate reduction in agricultural output. This adverse production effect can arise even when the NREGA activities lead to a moderate improvement in agricultural productivity. Some empirical facts validate our concerns and the data on food prices tend to support our finding to some extent.

Keywords: Labour Market; Labour Supply; Poor Household; Surplus Labour; Rich Household (search for similar items in EconPapers)
Date: 2013
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Related works:
Working Paper: UNDERSTANDING NREGA-- A SIMPLE THEORY AND SOME FACTS (2011)
Working Paper: Understanding NREGA: A Simple Theory and Some Facts (2010)
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DOI: 10.1007/978-81-322-0857-0_7

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