Understanding NREGA: A Simple Theory and Some Facts

  • Diganta Mukherjee
  • Uday Bhanu Sinha


The government of India has implemented the National Rural Employment Guarantee Act (NREGA) in recent past, to complement the income of the poor by providing them employment for certain number of labour days in a year. In this chapter, using a simple theoretical framework, we have analysed the impact of NREGA scheme on (1) rural labour market, (2) income of the poor households and (3) overall agricultural production. We show that in some situations the poor may exhibit a backward-bending supply curve of labour which may lead to an aggregate reduction in agricultural output. This adverse production effect can arise even when the NREGA activities lead to a moderate improvement in agricultural productivity. Some empirical facts validate our concerns and the data on food prices tend to support our finding to some extent.


Labour Market Labour Supply Poor Household Surplus Labour Rich Household 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.



We are grateful to Nancy Chau, Deepti Goel, Bishwantath Goldar and J. V. Meenakshi for helpful comments on an earlier version of this chapter.


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Copyright information

© Springer India 2013

Authors and Affiliations

  1. 1.Indian Statistical InstituteKolkataIndia
  2. 2.Department of Economics, Delhi School of EconomicsUniversity of DelhiNew DelhiIndia

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