Does historical land inequality attenuate the positive impact of India’s employment guarantee program?

By providing 100 days of guaranteed employment to every rural household, the National Rural Employment Guarantee Act (NREGA) can challenge the hegemony of landed elites as major employers in the Indian countryside. Using the colonial classification of landlord and non-landlord-based land-revenue institutions in India, this paper provides a political economy explanation for regional variation in the labor market impact of NREGA. The extractive landlord-based system led to high inequality in landownership and political domination by a large landlord class. Comparing the labor market impacts of NREGA between the landlord and non-landlord districts in a difference-in-differences and triple-difference framework, we find that the provision of public employment under NREGA and correspondingly, its impact on rural wages is muted in landlord districts. In these districts, public employment under NREGA substitutes for self-farming but has no impact on private wage employment. However, the program is highly successful in raising wages by generating more public employment in non-landlord districts. In these districts, the provision of public employment under NREGA crowds-out labor primarily from unpaid domestic work, reflecting an increase in women’s participation in the program. These findings suggest that NREGA has not become a credible alternative to private employment in regions historically characterized by exclusionary economic and political institutions since large land-owning elites in these regions have managed to keep wages depressed by virtue of their position as major employers in the countryside.