Impact of MGNREGA on labour wage rate dynamics in India

Abstract

This study is the first one to examine the impact of Mahatma Gandhi National Rural Employment Guarantee Act 2005 (MGNREGA) on market wage rates for manual labourers, validating against the workers’ responses. We use a unique database, namely Workers Level Schedule (WLS), sourced from the All India Coordinated Report by the Planning Commission (now, NITI Aayog) of the government of India. As MGNREGA may have been differentially implemented across districts in India, we control factors such as the number of days worked under MGNREGA, number of days worked for creating MGNREGA assets, number of days worked for non-MGNREGA related works, wage rate per day for MGNREGA work, wage rate per day for non-MGNREGA work, number of hours worked per day under MGNREGA work, and number of hours worked per day under non-MGNREGA work. Using the data from 12 different states in India, we find that the impact of MGNREGA in increasing market wage rate is not uniform. We conclude with the argument that unless location based regional characteristics are included within the MGNREGA scheme, a pan-Indian policy of such nature can not reach the targeted group of poor rural households in an extremely heterogeneous country like India.