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

Parantap Basu and Kunal Sen

No 9454, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: NREGA; employment guarantee; credit good; financial inclusion (search for similar items in EconPapers)
JEL-codes: H53 J43 O11 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2015-10
New Economics Papers: this item is included in nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Welfare Implications of the Indian Employment Guarantee Programme with a Wage Payment Delay (2015)
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