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Effect of employment guarantee on access to credit: Evidence from rural India

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  • Saraswat, Deepak

Abstract

Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) is the largest and most ambitious public works program for poverty alleviation, adopted by Government of India since independence. It was implemented in year 2006, starting with the first phase of 200 most backward districts in India. Two more consecutive phases were implemented to cover all rural regions in India but, even after almost 6 years of its implementation, it has not been adequately analyzed for its effect on various development indicators. This paper aims to study, whether participating in a typical employment guarantee program like MGNREGA, increases access to financial services and in particular, credit. Results provide evidence that, MGNREGA has been successful in self-selecting rural poor into participation and households participating longer in the program have been able to borrow more from formal sources. This paper also provides evidence that, increase in productivity of economic activities for participants, due to work in MGNREGA acts as a link between longer participation and increased access to formal credit.

Suggested Citation

  • Saraswat, Deepak, 2011. "Effect of employment guarantee on access to credit: Evidence from rural India," MPRA Paper 34671, University Library of Munich, Germany, revised 13 Nov 2011.
    • Handle: RePEc:pra:mprapa:34671
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    File URL: https://mpra.ub.uni-muenchen.de/34671/1/MPRA_paper_34671.pdf
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    References listed on IDEAS

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    Cited by:

    1. Clive Bell & Abhiroop Mukhopadhyay, 2020. "Income Guarantees and Borrowing in Risky Environments: Evidence from India's Rural Employment Guarantee Scheme," Economica, London School of Economics and Political Science, vol. 87(347), pages 763-812, July.

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    More about this item

    Keywords

    MGNREGA; Access to Credit;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • C0 - Mathematical and Quantitative Methods - - General
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • C87 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Econometric Software
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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