"Why is Agricultural Productivity So Low in Poor Countries? The Case of India". Joint work with Oksana M. Leukhina.
It is well known that poor countries exhibit a large labor productivity gap between urban and agricultural sectors. Furthermore, development economists have pointed out that the low agricultural productivity stems from the persistence of small non-mechanized farms. We propose and quantify one potential explanation for this phenomenon. If residing in a village provides access to a network that effectively insures against income fluctuations, then households are less willing to live in the cities where labor income risk is uninsured. As a result, labor stays cheap in agriculture, and the incentives for switching to capital-intensive methods of farming remain weak. In order to understand the quantitative importance of this mechanism, we calibrate the model to Indian data and study an abstract policy intervention - a provision of complete insurance against earnings risk in the city. The policy intervention decreases the urban-rural gap by 32 percent. This effect comes about because of a 13 percent drop in the agricultural share of employment, which encourages an inflow of capital and raises average farm size by 9 percent.
It is well known that poor countries exhibit a large labor productivity gap between urban and agricultural sectors. Furthermore, development economists have pointed out that the low agricultural productivity stems from the persistence of small non-mechanized farms. We propose and quantify one potential explanation for this phenomenon. If residing in a village provides access to a network that effectively insures against income fluctuations, then households are less willing to live in the cities where labor income risk is uninsured. As a result, labor stays cheap in agriculture, and the incentives for switching to capital-intensive methods of farming remain weak. In order to understand the quantitative importance of this mechanism, we calibrate the model to Indian data and study an abstract policy intervention - a provision of complete insurance against earnings risk in the city. The policy intervention decreases the urban-rural gap by 32 percent. This effect comes about because of a 13 percent drop in the agricultural share of employment, which encourages an inflow of capital and raises average farm size by 9 percent.
"The Rise and Fall of India's Relative Investment Price: A Tale of Policy Error and Reform". Joint work with Alok Johri, American Economic Journal: Macroeconomics, 2022, 14 (1): 146-78.
India's relative price of investment rose 44 percent from 1981 to 1991 and fell 26 percent from 1991 to 2006. We build a simple DGE model calibrated to Indian data in order to explore the impact of capital import substitution policies and their reform post-1991, in accounting for this rise and fall. Our model delivers a 23 percent rise before reform and a 31 percent fall thereafter. GDP per effective labor was 3 percent lower in 1991 compared to 1981 due to import restrictions on capital goods. Their removal and a 71 percentage point reduction in tariff rates raised GDP per effective labor permanently by 20percent.
India's relative price of investment rose 44 percent from 1981 to 1991 and fell 26 percent from 1991 to 2006. We build a simple DGE model calibrated to Indian data in order to explore the impact of capital import substitution policies and their reform post-1991, in accounting for this rise and fall. Our model delivers a 23 percent rise before reform and a 31 percent fall thereafter. GDP per effective labor was 3 percent lower in 1991 compared to 1981 due to import restrictions on capital goods. Their removal and a 71 percentage point reduction in tariff rates raised GDP per effective labor permanently by 20percent.
"Baby Bonus, Anyone? Examining Heterogeneous Responses to a Policy". Joint work with Natalie Malak & Terry Yip, Journal of Population Economics, 32 - 4 (2019): 1205-1246.
We examine the impact of the Allowance for Newborn Children, a universal baby bonus offered by the Canadian province of Quebec, on birth order, sibship sex composition, income, and education. We find a large response for third and higher-order births for which the bonus was more generous. Interestingly, though, we find stronger response if there were two previous sons or a previous son and daughter rather than two previous daughters. We also find, in addition to a transitory effect, a permanent effect, with the greatest increase in one daughter-two son families among three-child households. Moreover, we find a hump shape response by income group, with the greatest response from middle-income families. Also, women with at least some post-secondary education respond more to the policy than those with less. These findings suggest that properly structured pro-natal policies can successfully increase fertility among different segments of the population while simultaneously diminishing the effect of gender preferences and fertility disparity related to women’s education.
We examine the impact of the Allowance for Newborn Children, a universal baby bonus offered by the Canadian province of Quebec, on birth order, sibship sex composition, income, and education. We find a large response for third and higher-order births for which the bonus was more generous. Interestingly, though, we find stronger response if there were two previous sons or a previous son and daughter rather than two previous daughters. We also find, in addition to a transitory effect, a permanent effect, with the greatest increase in one daughter-two son families among three-child households. Moreover, we find a hump shape response by income group, with the greatest response from middle-income families. Also, women with at least some post-secondary education respond more to the policy than those with less. These findings suggest that properly structured pro-natal policies can successfully increase fertility among different segments of the population while simultaneously diminishing the effect of gender preferences and fertility disparity related to women’s education.
