The 'Discouraged Worker Effect' in Public Works Programs: Evidence from the MGNREGA in India

65 Pages Posted: 8 Dec 2016

See all articles by Sudha Narayanan

Sudha Narayanan

Indira Gandhi Institute of Development Research (IGIDR)

Upasak Das

University of Pennsylvania

Yanyan Liu

International Food Policy Research Institute (IFPRI)

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

Date Written: December 7, 2016

Abstract

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.

Keywords: administrative rationing, discouraged worker effect, employment guarantee, India, labor supply, MGNREGA, workfare programs

JEL Classification: J08; J38

Suggested Citation

Narayanan, Sudha and Das, Upasak and Liu, Yanyan and Barrett, Christopher B., The 'Discouraged Worker Effect' in Public Works Programs: Evidence from the MGNREGA in India (December 7, 2016). Available at SSRN: https://ssrn.com/abstract=2882149 or http://dx.doi.org/10.2139/ssrn.2882149

Sudha Narayanan

Indira Gandhi Institute of Development Research (IGIDR) ( email )

Gen A.K. Vaidya Marg Santoshnagar
Goregaon (East)
Mumbai, Maharashtra 400065
India

Upasak Das (Contact Author)

University of Pennsylvania ( email )

New Delhi
India

Yanyan Liu

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

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