Public Policy and Informal Institutions: A New Moral Economy of Corruption in Rural India

Abstract

How does the interaction between formal and informal institutions shape policy out- comes? This paper investigates the ways in which informal institutions distort the formal rules created by a large public works program in a poor, mostly rural, North Indian district. Born out of a legislative agenda that emphasized a universal right to work, and implemented in India since 2005, the National Rural Employment Guarantee Scheme (or NREGS) represents a radical democratic experiment. A public works scheme, NREGS delivers benefits through self-selection rather than means-tested targeting – a move that was intended to provide unemployment relief through the promotion of grassroots democracy. Based on 15 months of intensive fieldwork done in Uttar Pradesh, India, this paper shows that the scheme has been implemented in a way that is deeply inimical to NREGS’ emancipatory agenda. I argue that informal institutions have responded – and largely adjusted – to new opportunities and new state rules, building on traditional mechanisms of dealing with state machinery and edicts. The outcome is a moral economy of corruption, a set of norms about the allocation of public resources that has emerged to answer the agency problems created by the new institutional framework, such as the decentralization of welfare benefits.