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Hotter years are associated with lower economic output in developing countries. We show that the effect of temperature on labor is an important part of the explanation. Using microdata from selecte...

International audience; This paper investigates the impact of informal microfinance groups (self-help groups, or SHGs) on children’s education and work in rural India. In 2002, 24 eligible villages were randomly selected for opening SHGs, and 12 others were randomly selected as a control group. Households were surveyed three times over a 5-year period, allowing for the study of medium-term outcomes. We find a robust and strong increase in secondary school enrollment rates over time, with intention-to-treat estimates of about 40%. This effect stems from a quicker grade progression, leading to lower dropout rates between primary and secondary school. Contrary to usual presumptions, we find no decrease in overall child labor (but a reorientation toward part-time domestic work) and no direct role of credit. By contrast, we show that social interactions within SHGs are very important.

We estimate attendance gains for primary school children from a cost‐neutral change in the design of India’s school meal program. Municipal schools in the capital region of Delhi shifted from packaged food to cooked meals in 2003, with no change in payments to meal providers. Using the staggered implementation of this transition and child‐level panel data, we estimate a 3 percentage point increase in average monthly attendance, with large effects for early grades. We also find that girls are more responsive to the cooked meals, but because they attend morning schools, whereas boys attend afternoon schools, this may simply reflect benefits from better‐timed meals. Our study illustrates how better‐designed transfers can improve outcomes within tightly constrained budgets.

Since the late 1970s, the price indices underlying the poverty lines in India have been updated using aggregate indices. Widespread criticism of these indices led to the adoption of a new official methodology in 2011 based on unit values from con- sumption survey data. We propose an alternative approach that identifies poverty from consumer behaviour, based on the notion that equally poor households spend the same proportion of their incomes on food. Compared with official estimates, we find higher levels of poverty in eastern India, and generally, smaller reductions in poverty from 2005 to 2010. Our poverty numbers are validated by the calorie composition of households around the poverty lines and self-reported hunger.

Farmer profit can be increased and air quality improved

Microfinance groups often engage in a variety of collective activities not directly related to credit. We design a three-stage repayment game to examine how the existence of these ancillary activities affect repayment behavior and group attrition. In the first stage, the group borrows under joint liability, each member undertakes a risky project and decides whether or not to contribute to loan repayment. In the second stage, contributing members can vote to expel others from the group. Those remaining engage in a public goods game in the last stage. The public good game represents the non-credit collective activity that members can be involved in. We identify repayment equilibria with and without exclusion and show that exclusionary equilibria are most likely when loans are large and there is significant within-group heterogeneity in the gains from the public good. Results from a laboratory experiment that embodies the main features of the repayment game are consistent with the theoretical predictions. Individual decisions to contribute to loan repayment depend on gains from the public good and groups with the largest debt burdens have the highest rates of default and attrition.

We study how information to parents and schools on the performance of primary school children can improve learning outcomes in an environment where public and private schools co-exist. Contiguous village councils in the Indian state of Rajasthan are randomly assigned to either a control or one of four treatment groups in which student report cards on curriculum-based tests are provided to schools, parents or both. We find no changes in academic performance in public schools. Student performance in private schools improves by one-third of a standard deviation when parents and schools can simultaneously place themselves in the distribution of scores in the community. There is no systematic change in performance for any treatment that involves only schools, or where households are not informed about the relative performance of all schools in the community. These results highlight the importance of common knowledge of relative school quality and provider incentives in improving learning.

We adapt recently developed econometric techniques to estimate the distribution of welfare gains from public schools in rural India. Individuals have preferences over school quality and income spent on other goods. In a situation where both private and pubic schools are available, we define the cash-equivalent value of the public school as the hypothetical income sacrifice that would equate an individual’s utility to his/her utility when only the private school was available. We apply this procedure to data on income, enrollment and school quality from the Indian Human Development Survey of 2012 and estimate the distribution of implicit transfers across states and income deciles. We find these transfers are progressive. Poor households receive more on average because they have higher fertility and because their children are more likely to attend state schools. We also find however that transfers are particularly small for some of the poorest states in central and eastern India because of their low public school quality. Our methods can be generalized to measure the distribution of benefits from other types of public goods and government services.

Voters in India are often perceived as being biased in favor of parties that claim to represent their caste. We incorporate this caste bias into voter preferences and examine its inuence on the distributive policies and corruption practices of the two major political parties in the North Indian state of Uttar Pradesh (U.P.). We begin with a simple two-party, two-caste model to show that caste bias causes political parties to diverge in their policy platforms and has ambiguous eects on corruption. We then develop the model to make it correspond more closely to political reality by incorporating class-based redistributive policies. We use survey data from U.P. that we collected in 2008-2009 to calibrate voter preferences and other model parameters. We then numerically solve for the model’s equilibria, and conduct a counterfactual analysis to estimate policies in the absence of caste bias. Our model predicts that the Bahujan Samaj Party (BSP), which was in power at the time of our survey, would be signicantly less corrupt in a world without caste-based preferences.

Meritocratic systems are commonly understood as those that assign tasks to individuals who can best perform them. But future performance cannot be known prior to assignment, and must be inferred from other traits. We consider a model in which performance depends on two attributes --- ability and training --- where ability is endowed and unobserved and training is acquired and observed. The potential to acquire training depends on ability and resource access, so ability affects performance through two channels: indirectly through training and directly through the performance function. The population consists of two identity groups, each with the same ability distribution, but with differential access to resources. We characterize the sets of training levels that maximize expected performance. An allocation is monotonic if, for each group, there is a threshold value of training such that all those above this value (and none below) are selected. It is group-blind if assignment is independent of group identity, and psuedomeritocratic if it is both monotonic and group-blind. We show that performance-maximizing allocations are not generally monotonic or group-blind, and are pseudomeritocratic under only very special conditions. This is true even when individuals can respond to non-monotonic policies by underinvesting in training, or when commitment to selection policies is possible.

We study the distribution of food aid in Ethiopia between 1994 and 2004 using data from the Ethiopian Rural Household Survey. Over this period village leaders had considerable discretion in disbursing aid subject to official guidelines and periodic monitoring. We use a principal-agent model and household panel data for approximately 940 households to understand biases in the allocation of aid. The model shows that correlations between aid and observed measures of need are not a good measure of targeting because agents have incentives to distort allocations within targeted classes. Consistent with the model, we find that the aid recipients match official criteria but disbursements are negatively correlated with determinants of need that are not easily observable by monitoring agencies, namely pre-aid consumption, self-reported power and involvement in village-level organizations. Our results suggest informal structures of power within African villages influence the extent to which food aid insulates some of the world's poorest families from agricultural shocks but also that policy guidelines do constrain permissible deviations from need-based allocations.

Group loans with joint liability are a distinguishing feature of many microfinance programs. While such lending benefits millions of borrowers, major lending institutions acknowledge its limited impact among the very poor and have shifted towards individual loans. This paper attempts to explain this trend by exploring the relationship between borrower wealth and the benefits from group lending when access to credit is limited by strategic default. In our model, individuals of heterogeneous wealth face a given investment opportunity so poor investors demand larger loans. We show that the largest loan offered as an individual contract cannot be supported as a group loan. Joint liability cannot therefore extend credit outreach in the absence of additional social sanctions within groups. We also find that the benefits from group loans are increasing in borrower wealth and that optimal group size depends on project characteristics. By allowing for multi-person groups and wealth heterogeneity in the population, the paper extends the standard framework to analyze joint liability and contributes to an understanding of the conditions under which microcredit can reduce poverty.

The importance of Total Factor Productivity (TFP) in explaining output changes is widely accepted, yet its sources are not well understood. We use a proprietary data set on the oor-level operations at the Bhilai Rail and Structural Mill (RSM) in India to understand the determinants of changes in plant productivity between January 2000 and March 2003. During this period there was a 35% increase in output with minimal changes in the stock of physical capital or the number of employees, but sizable reductions in the number and duration of various types of production delays. We model interruptions to the production process as a function of worker characteristics and find that a large part of the avoidable delay reductions are attributable to training. Overall, changes in all delays account for over half the changes in productivity. Our results provide some explanation for the large within-industry di erences in productivity observed in developing countries and also suggest that specic knowledge-enhancing investments can have very high returns. Our approach also provides an example of how detailed data on production processes can be fruitfully used to better understand TFP changes, which have typically been treated as residuals in growth-accounting exercises.

This special issue on gender comprises articles from four different country settings: Sierra Leone, Senegal, Bangladesh, and Albania. Each uses large secondary data sets to explore how changing market and institutional environments affect gender attitudes and outcomes. In spite of the many historical and contemporary differences in these four economies, we see common difficulties in achieving gender equality.

Many otherwise successful social programs have limited outreach among the very poor. We show how a recently developed nonparametric test can detect this pattern of program participation. We apply the test to data on participation in a microcredit program in India and do find participation increasing in income among the poorest households in the region.

How much of the observed segregation between black and white Americans can be attributed to income disparities between the two groups? We adopt an approach to the decomposition of segregation measures that combines the method of indirect standardization with the idea that some degree of segregation is the outcome of purely random processes. Using the dissimilarity index as a measure of segregation and data on race and income from US metropolitan areas for 2000, we find that the role played by racial income inequality in accounting for segregation is modest but varies significantly across cities.

We use an optimization algorithm to solve a two-period planner's problem of spatially allocating public goods. We apply the algorithm to data on the location of post offices in South India between 1981–1991 and show that more appropriate choices could have reduced travel costs by at least 20%.

Research on caste-based inequalities in India has generally focused on differences between large categories such as the Scheduled Castes, the Scheduled Tribes, and the remainder of the population. We contribute to the literature on horizontal inequalities in India by looking within these groupings, and studying differences between the individual jatis that comprise these categories. Using census data, we find evidence of persistent inequalities in educational outcomes between the jatis, suggesting that socio-economic hierarchies have proved to be stable throughout the post-Independence period. Indeed, the evidence points to divergence: communities with more education in 1961 also had higher educational attainment in 2001. Also, while numerically larger Scheduled Caste communities witnessed greater improvements in educational levels compared to smaller ones, this was not true for the Scheduled Tribes. This may be the result of their greater political mobilization.

This paper examines how public goods get allocated by a centralized state. We use data on social structure and public goods in rural India over the sixties, seventies and eighties to examine the influence of particular social groups, and of social and economic heterogeneity more generally, on the availability of public goods. This was a period of rapid expansion in these goods and of important shifts in the political leverage enjoyed by different groups. We find that social divisions are important, but so are the relative positions of particular goups in the broader social hierarchy. These divisions are not however immutable, nor is their influence overwhelming. Some previously marginalized communities have gained over this period while others continue to be disadvantaged. There has also been considerable convergence in the availability of public goods over this period, suggesting that the state feels some compulsion to equalize access, even to those who are not politically influential.

We examine the influence of three historically important sources of social divisions on the availability of public goods in rural India: colonial power, landowner-peasant relations as determined by the land tenure system and social fragmentation based on the Hindu caste system and the presence of sizable religious minorities. Using data on public goods from 1991, we find that regions that were under British colonial power in the pre-independence period and those where agrarian power was concentrated in the hands of landlords have lower access to these goods as do areas with high levels of social fragmentation. (JEL: H41, P16)

Most high and middle-income countries showed symptoms of skill-biased technological change in the 1980s. India — a low income country — did not, perhaps because India's traditionally controlled economy may have limited the transfer of technologies from abroad. However the economy underwent a sharp reform and a manufacturing boom in the 1990s, raising the possibility that technology absorption may have accelerated during the past decade. We investigate the hypothesis that skill-biased technological change did in fact arrive in India in the 1990s using panel data disaggregated by industry and state from the Annual Survey of Industry (ASI). These data confirm that while the 1980s were a period of falling skills demand, the 1990s showed generally rising demand for skills, with variation across states. We find that increased output and capital-skill complementarity appear to be the best explanations of skill upgrading in the 1990s. Skill upgrading did not occur in the same set of industries in India as it did in other countries, suggesting that increased demand for skills in Indian manufacturing is not due to the international diffusion of recent vintages of skill-biased technologies.

This paper explores the manner in which race and income interact to determine patterns of residential location in metropolitan areas. We use a framework in which individuals care about both the level of affluence and the racial composition of their communities, and in which there are differences in income both within and between groups. Three main findings emerge. First, conditional on income, black households experience lower neighborhood quality relative to whites at any stable equilibrium. Second, extreme levels of segregation can be stable when racial income disparities are either large or negligible, but unstable in some intermediate range. Third, there exist multiple stable equilibria with very different levels of segregation when racial income disparities are sufficiently small. These results hold even when preferences are pro-integrationist, in the sense that racially mixed neighborhoods within a certain range are strictly preferred by all households to homogenous neighborhoods of either type.

For a large variety of data recorded by the Census of India, such as those on language, age structure, religion, and on individual Scheduled Castes and Tribes, the district is the lowest level of aggregation at which these data are published. Between 1961, when the first comprehensive census of independent India was conducted, and the Census of 2001, which is the last census for which complete data have been published, the number of districts in India increased from 339 to 593. In this paper we describe these boundary changes, and construct a set of 232 regions with consistent boundaries between 1961–2001, that span the entire country. Our methodology permits a careful construction of district-level panels between any two census years in this period, using the detailed tables provided.

We think of voice as a means of information aggregation within groups operating in a variety of settings. We explore how the characteristics of groups and their leaders influence voice. In relatively homogeneous groups, members farthest away from the leader have the best incentives to provide information, and their voice tends to moderate policy decisions. In large heterogeneous groups where leaders cannot identifY individual members, the possibilities for informational exchange are severely limited, and any communication that exists pushes policies farther to the extreme.

This paper examines the effects of heterogeneity in school quality on high school wages, college enrolment rates and social surplus. Greater heterogeneity in school quality, combined with pooling on the labor market for high school graduates, is shown to result in lower average high school wages, inefficient college-going decisions, and, in some cases, lower social surplus. These effects of heterogeneity tend to be reinforced by technical change which raises the return to human capital. Technical change leads to bigger increases in the college-high school wage ratio when there is more underlying heterogeneity in the school system. Performance standards implemented through the mandatory testing of all high school graduates are shown to raise average high school wages and social surplus by reducing the distortion in college-going incentives.

Since the late 1970s, the price indices underlying the poverty lines in India have been updated using aggregate indices. Widespread criticism of these indices led to the adoption of a new official methodology in 2011 based on unit values from consumption survey data. We propose an alternative approach that identifies poverty from consumer behaviour, based on the notion that equally poor households spend the same proportion of their incomes on food. Compared with official estimates, we find higher levels of poverty in eastern India, and generally, smaller reductions in poverty from 2005 to 2010. Our poverty numbers are validated by the calorie composition of households around the poverty lines and self-reported hunger.

In this paper we provide an empirical analysis of the performance of microfinance groups, known as Self-Help groups, based on an original census we carried out in a poor area of Northern India. We examine whether traditionally disadvantaged villagers, such as members of lower castes or landless farmers, are less likely to have access to groups. We also analyze their performance in terms of access to bank loans, which is an important benefit of the groups. We nd evidence of the attrition process being selective against lower castes: they have a lower probability of becoming a permanent member of a group. The net effects in terms of their expected access to a bank loan remain however relatively limited. By contrast, even though landless farmers are more likely to fail or leave the groups, they tend to bene t disproportionately. In expected terms, they receive more than two times the amounts of bank loans given to farmers owning more than one acre. Overall, the program therefore has positive and important distributional implications.

We use a proprietary data set on the floor-level operations at the Bhilai Rail and Structural Mill (RSM) in India to understand how output rose sharply in response to competitive pressures. Output increases came predominantly from reductions in production delays of various kinds. We model interruptions to the production process as a function of worker characteristics and training and find that a large part of the avoidable delay reductions are attributable to a particular form of training, suggesting that such investments can have very high returns. Our work suggests very high returns to knowledge-enhancing investments in emerging economies.

We use village level data from the 1991 and 2001 Indian Censuses to examine how the availability of health facilities and safe drinking water at the village level affect juvenile sex ratios. In addition to controlling for village fixed effects in our estimating equation of the juvenile sex ratio, we also allow villages to be heterogeneous in terms of how their juvenile sex ratios respond to the availability of health facilities and safe drinking water. A key result we obtain is that although the presence of public health facilities does not exert a positive, significant effect on juvenile sex ratios on average, they do so in villages where the problem of discrimination against girls is most acute, i.e., in villages at the 0.10 and 0.25 quantiles of the conditional juvenile sex ratio distribution. Thus public policy can be an effective tool in improving gender balance in cases where it is most needed.  Â

We use village level data from the 1991 and 2001 Indian Censuses to examine how the availability of health facilities and safe drinking water at the village level affect juvenile sex ratios. In addition to controlling for village fixed effects in our estimating equation of the juvenile sex ratio, we also allow villages to be heterogeneous in terms of how their juvenile sex ratios respond to the availability of health facilities and safe drinking water. A key result we obtain is that although the presence of public health facilities does not exert a positive, significant effect on juvenile sex ratios on average, they do so in villages where the problem of discrimination against girls is most acute, i.e., in villages at the 0.10 and 0.25 quantiles of the conditional juvenile sex ratio distribution. Thus public policy can be an effective tool in improving gender balance in cases where it is most needed.

In India, for many empirical questions, states have been the standard unit of analysis and they are a natural starting point for research using official data sources because state governments set political agendas and budgets and administer a wide range of services. The use of more disaggregated district data allows the study of outcomes across regions with similar historical contexts and political regimes. Most district-level studies, however, have relied on cross-sectional analysis because district comparisons over time are complicated by multiple boundary changes. As providing information on boundary changes across districts will facilitate the construction of district level panel data sets, this article provides data on the composition of all Indian districts over the 1971-2001 period that can enable the construction of district panels.

This Discussion Paper is issued under the auspices of the Centre’s research programme in DEVELOPMENT ECONOMICS. Any opinions expressed here are those of the author(s) and not those of the Centre for Economic Policy Research. Research disseminated by CEPR may include views on policy, but the Centre itself takes no institutional policy positions. The Centre for Economic Policy Research was established in 1983 as a private educational charity, to promote independent analysis and public discussion of open economies and the relations among them. It is pluralist and non-partisan, bringing economic research to bear on the analysis of medium- and long-run policy questions. Institutional (core) finance for the Centre has been provided through major grants from the Economic and Social Research Council, under which an ESRC Resource Centre operates within CEPR; the Esmee Fairbairn Charitable Trust; and the Bank of England. These organizations do not give prior review to the Centre’s publications, nor do they necessarily endorse the views expressed therein.

This paper focuses on the relationship between public action and access to public goods. It begins by developing a simple model to capture the various mechanisms that are discussed in the theoretical literature on collective action. We use the model to illustrate the special assumptions embedded in many popular theories of collective action and show how their apparently conflicting predictions can be reconciled in a more general framework. This is followed by a review of empirical research on collective action and public goods. These studies, while broadly consistent with the theoretical literature, account for a small part of the observed variation in provision. Access to public goods is often better explained by “top-down” interventions rather than the “bottom-up” processes highlighted in the collective action literature. We conclude with a discussion of some historically important interventions of this type.

Very poor households may be excluded from public programs intended for their benefit for a variety of reasons as lack information, a permanent residence or membershiip in social networks. We are interested in methods of testing for such exclusion based on independently drawn samples of program participants and non-participants. We discuss three alternative nonparametric procedures; sign tests, tests for stochastic dominance and a test for distribution crossing. In the cases where there is a poverty threshold below which program participation is difficult, our simulation results suggests that the last of these test procedures is the most powrful. we apply this test to data from a microfinance program in India and find evidence that the poorest households in the area were largely outside the program.