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Welfare Implications of the Indian Employment Guarantee Programme with a Wage Payment Delay

Parantap Basu and Kunal Sen ()

No 2015_01, CEGAP Working Papers from Durham University Business School

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 the 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.

Keywords: NREGA; Employment Guarantee; Credit Good; Financial Inclusion. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-pbe and nep-sog
Date: 2015-02
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