Abstract
This article focuses on the targeting accuracy of National Rural Employment Guarantee Scheme (NREG) in two Indian states, Madhya Pradesh (MP) and Tamil Nadu (TN), based on household data for 2009–2010. To overcome difficulties arising with the use of a specific poverty threshold, stochastic dominance tests are used. MP demonstrated much better targeting than TN in terms of the FGT class of poverty indices over a wide range of poverty thresholds. This is significant as the proportion of poor is twice as high in MP compared with TN. It raises doubts about prevailing views that there is greater under-provision of jobs under NREG in the poorer states. The self-selection of the poor was undermined and (relatively) affluent crowded in because of high NREG wage (relative to agricultural wage). Transfer benefits in the form of additional income to the poor were small mainly due to short spells of work and daily wages lower than minimum wage.
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