Evaluating the impact of MGNREGA on rural labour markets, and on urban labour markets via seasonal migration
Policymakers and academics are actively debating the efficacy of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and whether or not the new government should retain it in its current form in recent research. We have evaluated the impact of MGNREGA on rural labour markets, and on urban labour markets via seasonal migration.
We used National Sample Survey (NSS) data to evaluate the impact of MGNREGA on rural labour markets. Our evidence shows that from 2004-05 to 2007-08, in the 330 districts where MGNREGA was first introduced, private sector work decreased one for one with public sector hiring, and wages for casual labour excluding MGNREGA work increased by 5%. These effects were concentrated in the months from January to June, when MGNREGA work sites are open, and in seven states (Andhra Pradesh, Chhattisgarh, Madhya Pradesh, Himachal Pradesh, Rajasthan, Tamil Nadu and Uttarakhand) which provided most of the MGNREGA work. The results suggest the rural poor may benefit from MGNREGA in at least two ways: directly by earning income through participating in the programme, and indirectly by earning higher wages while doing non-MGNREGA casual labour for private employers. Quantifying these two effects we found that the indirect gain from the increase in private sector wages is significant, equivalent to 50% of the direct gains from participating in the programme.
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