• About

Economics for India

~ Research & Reflections on Indian Economy

Economics for India

Tag Archives: Bhagwati

Debating MNREGA!

25 Tuesday Nov 2014

Posted by paragwaknis in economics and governance, politcal economy

≈ Leave a comment

Tags

Ashok Kotwal, Bhagwati, MNREGA, Panagariya

In an article in support of Mr. Modi’s decision to limit MNREGA to only 200 poorest districts, Bhagwati and Panagariya  argue the following:

To appreciate fully how inefficient NREGA is at transferring income to the poor, consider the following. Existing data show that on average 30% of NREGA expenditures are incurred on materials and 70% on wages. Assuming daily NREGA wage to be Rs 130, this requires an expenditure of Rs 186 to employ one worker per day.

But not all Rs 130 in wages amount to transfer. When accepting NREGA employment, the worker forgoes the opportunity to work elsewhere. Even assuming daily market wage to be a low Rs 80, net transfer under NREGA is only Rs 50. So we spend a solid Rs 186 to transfer a mere Rs 50.

Even though the opportunity cost argument might sound logical prima facie it may not hold much water when confronted with reality. In absence of productive work, the opportunity cost for the rural labor could be in fact zero. In that case the transfer is the total Rs. 130. So it really boils down to the number one chooses or the wage rate and probability of finding work the actual worker faces!

Secondly, as argued by Kotwal and Sen, the wage rate offered by MNREGA may have served as a reference rate for determining the market wage rate as demanders and suppliers of agricultural labor internalize this opportunity cost. So most likely, the opportunity cost logic works from MNREGA to the market for agricultural labor and not other way round. Dili Abreu et. al provide a more balanced critic of MGNREGA that is worth reading in this context.

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 864 other followers

Follow me on Twitter

My Tweets

Blogroll

  • Ajay Shah's blog
  • EconAcademics blog aggregator
  • Musings of the Sorts!

Links on Indian Economy

  • An Alternative View of India's Economic Policies
  • Business Cycles in India
  • Centre for Monitoring Indian Economy
  • Economic and Political Weekly
  • eSocialSciences
  • FT's India Page
  • Ideas for India
  • IGIDR Finance Group
  • India at LSE
  • India Knowledge@Wharton
  • India Macroeconomics Annual
  • India Policy Forum
  • Indian data at FRED
  • Indian Economc Review
  • Indian Economic & Social History Review
  • LSE: EOPP Indian State Data
  • National Institute of Public Finance and Policy
  • NIPFP Macro-Finance Group
  • Parliament Research Services
  • People's Archive of Rural India
  • Reserve Bank of India
  • The Economist's India Page

Categories

  • affirmative action
  • Agrarian Issues
  • book review
  • business cycles
  • comparative development
  • diverse perspectives
  • economic history
  • economic reforms
  • economics and governance
  • education
  • Financial Crisis
  • growth
  • inflation
  • Infrastructure
  • legal reforms
  • macroeconomics
  • monetary policy
  • policy
  • politcal economy
  • politics
  • public policy
  • RBI
  • regional imbalance
  • socioeconomic perspectives
  • Uncategorized
  • Unemployment
  • voting behavior

Archives

  • June 2017
  • April 2017
  • November 2016
  • September 2016
  • July 2016
  • June 2016
  • November 2014
  • May 2014
  • March 2014
  • January 2014
  • December 2013
  • November 2013
  • September 2013
  • August 2013
  • April 2013
  • February 2013
  • October 2012
  • September 2012
  • July 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • June 2011
  • April 2011
  • February 2011
  • January 2011
  • October 2010
  • August 2010
  • March 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • February 2009
  • December 2008
  • November 2008
  • August 2008
  • July 2008
  • April 2008
  • March 2008
  • January 2008

Goodreads

Top Clicks

  • None

Meta

  • Register
  • Log in
  • Entries feed
  • Comments feed
  • WordPress.com

Create a free website or blog at WordPress.com.

Privacy & Cookies: This site uses cookies. By continuing to use this website, you agree to their use.
To find out more, including how to control cookies, see here: Cookie Policy