Enhancing local public service delivery: Experimental evidence on the national rural employment guarantee scheme in Bihar

The Mahatma Gandhi National Rural Employment Guarantee Scheme (MG-NREGS) is among the largest social protection programs in the world. In 2009-2010, administrative sources reported that MG-NREGS provided employment to 53.5 million households. Despite its impressive scale, in some states, including some of the poorest States of India like Bihar, the scheme appears to fall short of matching demand for work. Since MG-NREGS 2005 launch, there has also been a lively debate on its impact on the welfare of the poorest households and on the local economy. JPAL-South Asia is currently working with the Government of Bihar (GOB) to implement and evaluate a technology-based solution to address an important roadblock of implementation; by introducing the solutions in a phased-in fashion we also aim to examine the causal impact of NREGA on households.

The GOB has identified several administrative issues that explain low levels of program implementation in the State; administrative reports suggest that inability to access funds is a key constraint for local implementing agencies (Panchayat or village council). In order to improve the timeliness of the availability of funds, GoB is planning to allow Panchayats to order direct money transfers to beneficiaries’ accounts through the internet portal CPSMS (Central Plan Scheme Monitoring System). GoB expects the new fund flow to increase MG-NREGS spending by Panchayat, and enhance public employment provision. The reform is to be rolled out in three phases in each district, with each block randomly assigned to a phase. The first phase is planned to start in April 2012, the last phase in April 2013.

JPAL-South Asia has partnered with GOB to evaluate the reform by comparing Panchayats which are included first in the new system to those which join later. MG-NREGS spending and employment provision will be measured through administrative records. If the reform is indeed successful in inducing more spending, this will generate exogenous variations, at the block levels, in access to the scheme, which is unique for MG-NREGS. Previous impact evaluation studies of MG-NREGS had to use the phasing-in of the scheme across Indian districts, which was not exogenous, since the poorest districts entered the program first. In a second stage of the evaluation, household surveys will be conducted to measure the effect of an increase in public employment provision on household welfare and labor market outcomes (employment, wages and income, smoothing of shocks, occupations, migration).