The Impact of the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) on Rural Household Welfare and Labour Market Outcomes in India: A Difference-in-Differences Analysis

Abstract

Enacted in 2005, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) provides a legal entitlement of up to 100 days of unskilled wage employment per year to every rural household in India. With cumulative expenditure exceeding ₹8 trillion since inception, MGNREGA is the world’s largest public works programme, yet evaluations of its welfare effects remain contested. Exploiting the phased roll-out of the programme across three district cohorts (February 2006, April 2007, and April 2008), this paper estimates the causal effect of MGNREGA exposure on rural household welfare and labour market outcomes using a Difference-in-Differences (DiD) framework. The empirical analysis combines unit-level data from the 61st (2004–05) and 66th (2009–10) rounds of the National Sample Survey Office (NSSO) with district-level programme implementation data from the Ministry of Rural Development. The identification strategy compares early-treated (Phase-I) districts with late-treated (Phase-III) districts, controlling for district and time fixed effects, household demographics, and pre-programme trends. Findings indicate that MGNREGA exposure raised real monthly per-capita consumption expenditure by approximately 6.8 per cent, increased real casual-labour wages by 4.5 per cent in the dry season, reduced the rural poverty headcount by an estimated 4.2 percentage points, and raised female labour force participation by 3.1 percentage points among scheduled-caste and scheduled-tribe households. Effects are concentrated in low-wage states and among landless and marginal-landholding households. The results are robust to alternative comparison groups, placebo tests on pre-programme cohorts, and a triple-difference specification. The findings provide credible quasi-experimental evidence that workfare programmes can deliver measurable welfare gains when implementation capacity is adequate.