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

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  • Bhanu Gupta
  • Abhiroop Mukhopadhyay

Abstract

The National Rural Employment Guarantee Scheme (NREGS) in India is one of the largest public employment programmes in the developing world. It was introduced by the central government led by Indian National Congress (INC). While its 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 at the block level and addressing the issue of endogeneity by focusing on a subsample of blocks which had close elections, we find that the funds allocated were 22 percent higher in blocks where the INC seat share was less than 39 percent in the previous election. We provide a mechanism by 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

  • Bhanu Gupta & Abhiroop Mukhopadhyay, 2014. "Local funds and political competition: Evidence from the National Rural Employment Guarantee Scheme in India," Global Development Institute Working Paper Series esid-042-14, GDI, The University of Manchester.
  • Handle: RePEc:bwp:bwppap:esid-042-14
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    Cited by:

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    2. Pranab Bardhan & Sandip Mitra & Dilip Mookherjee & Anusha Nath, 2018. "Resource Transfers to Local Governments: Political Manipulation and Household Responses in West Bengal," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-319, Boston University - Department of Economics.
    3. Ronit Mukherji, 2019. "Local Leadership and Public Good: Evidence from The National Rural Employment Guarantee Scheme in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(2), pages 311-329, June.
    4. Matthew McCartney & Indrajit Roy, 2016. "A Consensus Unravels: NREGA and the Paradox of Rules-Based Welfare in India," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 28(4), pages 588-604, September.
    5. Chau, Nancy H. & Liu, Yanyan & Soundararajan, Vidhya, 2017. "Political activism as a determinant of clientelistic transfers: Evidence from an Indian public works program:," IFPRI discussion papers 1700, International Food Policy Research Institute (IFPRI).
    6. Gonschorek, Gerrit J. & Schulze, Günther G. & Sjahrir, Bambang Suharnoko, 2018. "To the ones in need or the ones you need? The political economy of central discretionary grants − empirical evidence from Indonesia," European Journal of Political Economy, Elsevier, vol. 54(C), pages 240-260.
    7. Deepti Goel & Ashwini Deshpande, 2020. "Social identity and perceived income adequacy," Review of Development Economics, Wiley Blackwell, vol. 24(2), pages 339-361, May.
    8. Bhalotra, Sonia & Clots-Figueras, Irma & Iyer, Lakshmi, 2021. "Religion and abortion: The role of politician identity," Journal of Development Economics, Elsevier, vol. 153(C).
    9. Pranab Bardhan & Sandip Mitra & Dilip Mookherjee & Anusha Nath, 2020. "How Do Voters Respond to Welfare vis-à-vis Public Good Programs? An Empirical Test for Clientelism," Staff Report 605, Federal Reserve Bank of Minneapolis.
    10. Sabyasachi Das & Souvik Dutta & Abhirup Sarkar, 2019. "Political Economy of Third Party Interventions," Working Papers 1029, Ashoka University, Department of Economics.
    11. Deininger, Klaus & Nagarajan, Hari K & Singh, Sudhir K, 2020. "Women's political leadership and economic empowerment: Evidence from public works in India," Journal of Comparative Economics, Elsevier, vol. 48(2), pages 277-291.
    12. Kjelsrud, Anders & Sjurgard, Kristin Vikan, 2020. "Public work and private violence," Memorandum 1/2020, Oslo University, Department of Economics.
    13. Chau, Nancy H. & Liu, Yanyan & Soundararajan, Vidhya, 2021. "Political activism as a determinant of strategic transfers: Evidence from an indian public works program," European Economic Review, Elsevier, vol. 132(C).
    14. Thushyanthan Baskaran & Sonia Bhalotra & Brian Min & Yogesh Uppal, 2018. "Women legislators and economic performance," WIDER Working Paper Series wp-2018-47, World Institute for Development Economic Research (UNU-WIDER).
    15. Das, Sabyasachi & Dutta, Souvik & Sarkar, Abhirup, 2021. "Political economy of third party interventions," Journal of Public Economics, Elsevier, vol. 195(C).
    16. Maaser, Nicola & Stratmann, Thomas, 2018. "Election rules, legislators' incentives, and policy outcomes: Evidence from the mixed member system in Germany," European Journal of Political Economy, Elsevier, vol. 54(C), pages 227-239.
    17. Baskaran, Thushyanthan & Bhalotra, Sonia & Min, Brian & Uppal, Yogesh, 2021. "Women Legislators and Economic Performance," QAPEC Discussion Papers 03, Quantitative and Analytical Political Economy Research Centre.
    18. Baskaran, Thushyanthan & Bhalotra, Sonia R. & Min, Brian & Uppal, Yogesh, 2018. "Women Legislators and Economic Performance," IZA Discussion Papers 11596, Institute of Labor Economics (IZA).
    19. Lara E., Bernardo & Toro M., Sergio, 2019. "Tactical distribution in local funding: The value of an aligned mayor," European Journal of Political Economy, Elsevier, vol. 56(C), pages 74-89.
    20. Mushtaq Ahmad Malla, 2020. "MGNREGA in Kashmir: An Analysis of Labour Market Outcomes and Livelihood Security," Indian Journal of Human Development, , vol. 14(3), pages 424-446, December.
    21. K. Vinay & Brinda Viswanathan, "undated". "Political Cycles in MGNREGs Implementation," Working Papers 2020-187, Madras School of Economics,Chennai,India.

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    More about this item

    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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