Workfare as "Collateral": The Case of the National Rural Employment Guarantee Scheme (NREGS) in India


This paper argues that a major beneficial impact of workfare programs is through their role in allowing participants to improve their access to "credit". Sustained program participation serves as "collateral" for households' acquisition of informal credit, leading to the improvement in economic security and poverty reduction. Using a three-round household panel dataset in India in 2009-2012, we produce robust evidence that continuous participation in NREGS facilitates credit acquisition, increases income and consumption, and reduces consumption variability. A conceptual framework using an infinitely repeated trilateral stage game among lender, workfare participant, and local politician is developed to support our empirical findings.


Workfare, Collateral, NREGS impact, Consumption, Credit

JEL Classification

C23, I38, O12


Subhasish DEY
Economics, School of Social Sciences, University of Manchester, UK

Katsushi S. IMAI
School of Social Sciences, University of Manchester, UK
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059