In the semi-arid region to which the state of Maharashtra in India belongs, agriculture is a highly seasonal activity. During the lean periods, large numbers of rural households eke out a bare subsistence through short spells of mostly unremunerative employment. The aim of the Maharastra Employment Guarantee Scheme (EGS) is to address this problem by providing guaranteed employment at a wage level sufficient to ensure a minimum level of subsistence. By reducing risks faced by poor households, and by constructing productive assets and infrastructure, the scheme also aims to have a longer-term developmental role. The EGS is designed so as to minimise the administrative costs and disincentive effects associated with targeted transfers. It does this in two main ways. First, the work requirement reduces the incentive for the non-poor to masquerade as the poor in order to qualify for benefits. Second, the work requirement also implies that benefits do not deter poverty-reducing investments in job search and/or building of human capital. As the work requirement necessarily excludes some people (e.g. the elderly), it is complemented by other schemes, such as state pensions and subsidised food.
Raghav Gaiha, Katsushi Ima
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