K. N. Raj Library – Content Alerts

Home » India » Welfare Implications of India’s Employment Guarantee Programme with a Wage Payment Delal

Welfare Implications of India’s Employment Guarantee Programme with a Wage Payment Delal

by Parantap Basu and Kunal Sen

IZA Discussion Paper no.9454, October 2015

We examine the efficacy of a popular anti-poverty programme, namely the National Rural Employment Guarantee Act (NREGA) of the Government of India. We argue that a chronic friction of wage payment delay in this flagship programme could adversely affect the welfare of the poor through two channels. First, it causes deferred consumption. Second, it turns labour into a credit good which makes an indebted household work harder to clear off his existing debt. The loss of welfare persists even when the worker has an outside employment option. If a programme of financial inclusion increases the indebtedness of the poor, a wage payment delay in the NREGA programme could escalate this welfare loss although the
official indicator of success (i.e., participation) may not reveal this friction.
Courtesy:IZA
Advertisements
%d bloggers like this: