Poverty Alleviation or Political Calculation? Implementing India’s Rural Employment Guarantee Scheme

Impact evaluations of poverty alleviation programs can give rise to biased estimates if politicians make implementation decisions with electoral returns in mind. Using a novel data set, I examine the effect of electoral competitiveness on the implementation of India’s National Rural Employment Guarantee Scheme. Results indicate a negative relationship between fund utilisation in the program and the vote share of the Indian National Congress, the main driver of the NREGS. These findings challenge the applicability of traditional probabilistic voting models in the Indian context, according to which transfers are made to competitive constituencies and are partially consistent with ideas of electoral opportunism whereby opposing parties can leverage public programs to claim credit. Using methods proposed by Altonji et al. (2000) and Oster (2013), I conclude it unlikely that unobservables can explain away these results. Background Large scale poverty alleviation programs have become increasingly common in the developing world. Conditional cash transfers in Latin America and work-fare programs in India, Malawi, Ethiopia and other countries in Africa are the most salient of these. Recent evaluations suggest that such programs have been effective in reducing poverty and improving human development outcomes, at least in the short run (de Brauw et al., 2014; Soares et al., 2010; Gertler, 2004; Rivera et al., 2004; Schultz, 2004). Their ensuing ∗McCourt School of Public Policy, Georgetown University; Email: ac1361@georgetown.edu. I would like to thank Alan de Brauw and Shareen Joshi for several discussions and insightful comments through the period of the study. Karthik Muralidharan and Varad Pande facilitated access to data. I am also grateful to Ambrish Dongre, Remi Jedwab and Milan Vaishnav for comments. Errors that remain are mine. 1 popularity with the electorate and the corresponding returns electoral returns has led to them being referred to as “instruments of electoral investment” for the incumbent party (Diaz-Cayeros et al., 2012). An enduring problem in evaluating electoral returns to poverty alleviation programs is that they are not randomly implemented. To overcome this, studies attempt to exploit randomized design or phased implementation designs to make causal claims. These broadly yield positive electoral returns, although the actual impact varies with the nature of the program and duration of exposure. For instance, early enrolment in Mexico’s PROGRESA/Oportunidades led to a nine per cent increase in incumbent support (De La O, 2013). The program was seen as more desirable if there was a longer window for people to benefit, and for the incumbent to claim credit. Similarly, Brazil’s incumbent government received electoral rewards from CCTs although there were decreasing returns over time (Zucco, 2011). In both countries, there was little evidence of an electoral backlash from those paying for benefits to vote against politicians who initiated and maintained these policies. In contrast, when studying the electoral returns of India’s National Rural Employment Guarantee Scheme (NREGS), Zimmermann (2012) found an inverse U-shaped relationship between duration of access and votes for the incumbent coalition. Despite the use of randomized design strategies or discontinuities in the implementation process, estimates of program outcomes would still be biased if politicians were guided by electoral motives while making choices about locations, rollout schedules and intensity of implementation. Politicians have several levers to control design, implementation and impact of such programs. The first of these is through program placement: a series of papers demonstrates that estimates of performance can be biased if programs are not placed randomly (Pitt et al., 1993; Duflo et al., 2007). If programs are placed where demand or need is already high (low), impact estimates will be upward (downward) biased. Placement may also be affected by opportunities for clientelism whereby political entities can indulge in discretionary rewarding of supporters through private benefits that can be withheld in case of non-compliant behavior. This would provide an incentive for politicians to select a particular location and/or group for a targeted program (Stokes et al., 2013; Roniger, 2004). Recent evidence suggests that politics does affect program placement in India. Gupta (2006) found that official selection criteria were often supplemented by political considerations in the case of the National Food for Work program, and the final choice of districts balanced by the goal of spreading early phase districts across states. Moreover, districts whose leaders were affiliated to the incumbent party or its allies appeared to have an advantage in receiving services earlier. Electoral campaign rhetoric is also indicative of Bolsa Famı́lia, Bolsa Escola, and Bolsa Alimentação. 2 politicians prioritising those regions or villages where they receive greater support. For instance, Vaishnav and Sircar (2012) find spatial and temporal variance in program implementation that can be traced to state-level election cycles and results in Tamil Nadu. A second mechanism through which politics influences program performance is the efficiency of implementation or targeting. Politicians may be involved in corrupt practices or leakages such as deliberate implementation delays, mismanagement of public funds or in extreme cases, outright theft. Leakage is a particularly salient issue in India, where poverty alleviation programs persist over long periods and many programs grant a high level of discretion to implementing officials (Kapur and Mukhopadhyay, Kapur and Mukhopadhyay; Gupta, 2013). Although India’s NREGS is one of the most heavily studied safety net programs in recent times, literature on the political antecedents of the program is relatively sparse. Most studies on its implementation focus on targeting mechanisms, elite capture and state capacity in terms of ability to provide work to households demanding it (Dutta et al., 2014, 2012; Liu and Barrett, 2013; Jha et al., 2009). Separate strands deal with accountability failures (Aiyar and Samji, 2006), leakages (Niehaus and Sukhtankar, 2013a,b), and the role of information in ameliorating this (Shankar and Gaiha, 2013; Shankar et al., 2011). Current studies on the political economy of implementation recognize the potential bias stemming from political motivations to electoral returns, but do not address it explicitly (Zimmermann, 2012). Inferences from other studies examining the political contexts of NREGS are somewhat limited since they are based in specific districts, and consequently do not recognize the importance of national level political priorities. For instance, Johnson (2009) does not find any impact of party affiliation of local leaders on NREGS outcomes; however, this is based on a subset of villages in one state where the local election constituency mapped onto a single Gram Panchayat, and only where INC experienced a close margin of victory or loss. Similarly, another study in specific districts across four states finds heterogeneous and non-linear effects of political competition in local elections on scheme participation (Shankar and Gaiha, 2013). In this paper, I focus on political motives behind poverty alleviation programs by examining if electoral outcomes affected placement and implementation of NREGS in India. A national level examination is particularly interesting since the program was implemented in the aftermath of an unexpected loss of the ruling National Democratic Alliance (NDA) headed by the Bharatiya Janata Party (BJP) and the emergence of the Indian National Congress (INC)-led United Progressive Alliance (UPA). A widely held belief was that this was a result of the NDA’s concentration on urbanisation-led See for instance, Trinamul Congress’ Member of Parliament, Shatabdi Roy’s speech available online at https://www.youtube. com/watch? v=M0jQmphZU0g. A Gram Panchayat is a locally elected village government. 3 growth which failed to trickle down to the majority of the rural poor who ostensibly did not buy into NDA’s “India Shining” election campaign. A universal rural employment guarantee program was a prominent component of INC’s manifesto and subsequently a high priority of the UPA government. Therefore, operational choices regarding NREGS may have been influenced by ideas relating to patronage by rewarding supporters, or opportunism by swinging voters towards the incumbent party. This paper fills a gap in the existing literature on the program by examining whether implementation choices were driven by INC’s competitiveness in the previous elections, and whether close elections mattered. Through this, I aim to throw insight on motivations of governments across the developing world with regard to both design and implementation choices of poverty alleviation programs. 1 Overview of NREGS With an outlay of nearly one per cent of India’s GDP in 2012-13 and covering 48 million households, India’s NREGS is the largest rights-based employment and social protection initiative in the world. The program provides a legal guarantee for 100 days of paid employment to rural households willing to do unskilled manual labor on locally planned public works at a notified wage that varies across states, and is periodically revised to account for inflation. This short-term safety net protects rural households from the risk of consumption falling below some crucial level (Ravallion et al., 2013), and reduces the urgency of seasonal and distress migration. By requiring that the projects be selected through local participation, it also promotes investments in public goods and local institutions. The idea of an employment guarantee as a safety net is not a novel one in India it can be traced back to the famine codes of the 1880s when the British administration used a self-selection mechanism fo