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MGNREGA policies and deterrence of development in rural India: An analytical approach

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  • Dube, Partha Pratim
  • Gangopadhyay, Partha

Abstract

The paper offers two new insights in the context of the Mahatma Gandhi national rural employment guarantee act (MGNREGA) in India: first, we establish that migration of the skilled workers can occur under the MGNREGA scheme due to the low wage rate while the quality of work degrades as skilled workers migrate. As a result, we argue, only subsidies can offer a helpline in this regard. Secondly, this paper also argues that the political economy assumes critical importance for any welfare intervention like MGNREGA. We hence model the political economy of rural sector to explain why MGNREGA policies can fail. We show that, in situations where political parties and politicians can sequentially commit first to de facto (local) tax rates, and then levels and distribution of local public goods such as institutions and infrastructure, the political equilibrium is an underprovision equilibrium. In the underprovision equilibrium, the local government at the grass-root level of democracy chooses low tax rates (de facto) and offers inadequate local public goods, which can thus be an equilibrium outcome, which will in turn deter rural development through MGNREGA policies to eradicate rural poverty.

Suggested Citation

  • Dube, Partha Pratim & Gangopadhyay, Partha, 2015. "MGNREGA policies and deterrence of development in rural India: An analytical approach," International Journal of Development and Conflict, Gokhale Institute of Politics and Economics, vol. 5(2), pages 101-113.
  • Handle: RePEc:gok:ijdcv1:v:5:y:2015:i:2:p:101-113
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    More about this item

    Keywords

    Migration equilibrium; Srinivasan-Bhagwati subsidy; Underprovision equilibrium; Electoral games; Local public goods;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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