Evaluating the Impact of India's National Rural Employment Guarantee Scheme

Abstract

I study India’s National Rural Employment Guarantee Scheme (NREGS) which guarantees up to a hundred days of employment in public works to rural households that demand work under the program. I exploit the cross-district rollout of the program to analyze the causal effect on household consumption. I use the National Sample Survey data to conduct a difference-in-difference analysis where the treatment group consists of households in 184 early implementation districts and the control group consists of households in 209 late implementation districts. The program significantly raised household per capita consumption by around 10 percent. For the marginalized caste group, the program increased consumption by around 12 percent. Therefore, historical and ongoing discrimination along with other barriers to entry have not prevented this group from benefiting from the program. I further assess household budget allocation by consumption categories. I finally analyze the effect of an affirmative action policy carried out through political reservation for marginalized castes and the differential impact reservation has on marginalized caste households in terms of benefiting from NREGS. I conduct a difference-in-difference-in-difference analysis to find that household consumption increases by 23 percent in the reserved districts (relative to the non-reserved districts) in the treatment districts (relative to the control districts) in 2006-07.