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The “Discouraged Worker Effect†in public works programs: Evidence from the MGNREGA in India

Listed author(s):
  • Narayanan, Sudha
  • Das, Upasak
  • Liu, Yanyan
  • Barrett, Christopher B.

This study investigates the consequences of poor implementation in public workfare programs, focusing on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) in India. Using nationally representative data, we test empirically for a discouraged worker effect arising from either of two mechanisms: administrative rationing of jobs among those who seek work and delays in wage payments. We find strong evidence at the household and district levels that administrative rationing discourages subsequent demand for work. Delayed wage payments seem to matter significantly during rainfall shocks. We find further that rationing is strongly associated with indicators of implementation ability such as staff capacity. Politics appears to play only a limited role. The findings suggest that assessments of the relevance of public programs over their lifecycle need to factor in implementation quality.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 1633.

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Date of creation: 2017
Handle: RePEc:fpr:ifprid:1633
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  1. Emmanuel Skoufias, 1994. "Using Shadow Wages to Estimate Labor Supply of Agricultural Households," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(2), pages 215-227.
  2. Basu, Parantap & Sen, Kunal, 2015. "Welfare Implications of India's Employment Guarantee Programme with a Wage Payment Delay," IZA Discussion Papers 9454, Institute for the Study of Labor (IZA).
  3. Blundell, Richard & Macurdy, Thomas, 1999. "Labor supply: A review of alternative approaches," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 27, pages 1559-1695 Elsevier.
  4. Ravallion, Martin, 2003. "Targeted transfers in poor countries : revisiting the tradeoffs and policy options," Policy Research Working Paper Series 3048, The World Bank.
  5. Clément Imbert & John Papp, 2015. "Labor Market Effects of Social Programs: Evidence from India's Employment Guarantee," American Economic Journal: Applied Economics, American Economic Association, vol. 7(2), pages 233-263, April.
  6. Parantap Basu & Kunal Sen, 2015. "Welfare Implications of the Indian Employment Guarantee Programme with a Wage Payment Delay," CEGAP Working Papers 2015_01, Durham University Business School.
  7. Harou, Aurélie & Liu, Yanyan & Barrett, Christopher B. & You, Liangzhi, 2014. "Variable returns to fertilizer use and its relationship to poverty: Experimental and simulation evidence from Malawi:," IFPRI discussion papers 1373, International Food Policy Research Institute (IFPRI).
  8. Dilip Mookherjee & Pranab K. Bardhan, 2000. "Capture and Governance at Local and National Levels," American Economic Review, American Economic Association, vol. 90(2), pages 135-139, May.
  9. Jeffrey M. Wooldridge, 2015. "Control Function Methods in Applied Econometrics," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 420-445.
  10. Benati, Luca, 2001. "Some empirical evidence on the 'discouraged worker' effect," Economics Letters, Elsevier, vol. 70(3), pages 387-395, March.
  11. Shorrocks, A F, 1982. "Inequality Decomposition by Factor Components," Econometrica, Econometric Society, vol. 50(1), pages 193-211, January.
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