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Local funds and political competition: Evidence from the National Rural Employment Guarantee Scheme in India

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  • Gupta, Bhanu
  • Mukhopadhyay, Abhiroop

Abstract

The National Rural Employment Guarantee Scheme (NREGS) in India is one of the largest public employment programs in the developing world. It was introduced by the central government led by Indian National Congress (INC). While it's implementation is, in principle, based on demand for work from households, we investigate how political competition affects intra district allocation of funds under the scheme. Using longitudinal data on funds allocated to blocks and elections held for block councils, we find that greater amount of funds were allocated to blocks where INC had lower seat share. Further, we address the issue of endogeneity by focusing on a subsample of blocks where the aggregate vote share of INC was close to that of it's rivals. Our results suggest that 1.5 percentage point more funds were approved for blocks that had 1 percentage point lower seat share for INC. We also provide a mechanism for the effect by showing that the results are only true when the MP of the district, a member of the body that approves the block fund allocation, is from INC.

Suggested Citation

  • Gupta, Bhanu & Mukhopadhyay, Abhiroop, 2016. "Local funds and political competition: Evidence from the National Rural Employment Guarantee Scheme in India," European Journal of Political Economy, Elsevier, vol. 41(C), pages 14-30.
    • Handle: RePEc:eee:poleco:v:41:y:2016:i:c:p:14-30
    DOI: 10.1016/j.ejpoleco.2015.10.009
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    More about this item

    Keywords

    Political economy; Local elections; NREGS;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • H53 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Welfare Programs
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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