Raising Consumption Through India's National Rural Employment Guarantee Scheme

Abstract

The Indian National Rural Employment Guarantee Scheme (NREGS) is one of the world's largest public works programs aimed at reducing poverty. NREGS guarantees up to a hundred days of employment in public works to rural households that demand work under the program. This is one of the first papers to analyze the impact of NREGS on household wellbeing by focusing on household consumption using national-level data. By focusing on consumption, I am able to assess whether and how household use the program to improve their living standards. I exploit the cross-district rollout of the program to analyze the causal effect on household consumption. Using the Consumption Expenditure Survey data from the National Sample Survey Organization, I 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. I find that the program significantly increased household per capita consumption between 6.5% and 10%. For the marginalized caste group, the program increased consumption by around 12%. Therefore, historical and ongoing discrimination along with other barriers to entry have not prevented this group from benefiting from the program. I further assess the impact on household budget allocation by focusing on various consumption categories. I find that households move toward the higher caloric and more nutritional items, like protein. Finally, for households with children there was significantly greater spending on “child goods” like milk, while in households without children spending on alcohol increased.