Abstract: Agricultural price support policies are a popular way to alleviate the risk inherent in volatile prices, but, at the same time, may distort input allocation responses to agricultural productivity shocks across multiple sectors. This could reduce productivity in the agricultural sector in developing countries. I empirically test for misallocation in the Indian agricultural setting, with national price supports for rice and wheat. I first motivate the setting using a two-sector, two-factor general equilibrium model and derive comparative statics. I then use annual variation in the level of the national price supports for rice and wheat relative to market prices, together with exogenous changes in district-level agricultural productivity through weather shocks, in a differences-in-differences framework. I derive causal effects of the price supports on production patterns, labor allocation, wages, and output across sectors. I find that rice area cultivated, rice area as a share of total area planted, rice yields, and rice production all increase, suggesting an increase in input intensity (inputs per unit area) dedicated to both staple crops. Wheat shows a similar increase in input intensity. The key input response is a reallocation of contract labor from the non-agricultural sector during peak cultivation periods, which results in an increase in wages in equilibrium in the non-agricultural sector (especially in response to price supports for the labor-intensive crop, rice, of 23%). The reallocation of labor reduces agricultural productivity by 82% of a standard deviation, and simultaneously reduces gross output in non-agricultural firms by 8.5%. I also find that rice- and wheat-producing households do not smooth consumption more effectively in response to productivity shocks in the presence of price supports.
“A Supply Side Rationale for Wage Floors: Evidence on Worker Collusion” (with Emily Breza and Supreet Kaur)
Abstract: A long tradition of work in social science posits that social norms affect labor market behavior. We use a field experiment to test whether community-wide norms against accepting wage cuts distort workers’ labor supply during periods of unemployment. We undertake our test in informal spot markets for casual daily labor in India. We partner with 183 existing employers, who offer jobs to 502 randomly-selected laborers in their respective local labor markets. The job offers randomly vary: (i) the wage level and (ii) the extent to which the job offer is observable to other workers. On average, 26% of workers accept a job if it is offered at the prevailing wage, with no distinguishable differences by observability. In contrast, observability strongly mediates the take-up of jobs offered below the prevailing wage: while 18% of workers accept work at a wage cut in private, takeup plummets to 4% when wage cuts are offered in public. The consequences of this behavior are substantial: those who forego accepting a wage cut in public are giving up 38% of average weekly earnings in order to avoid being seen as breaking the village norm. In a supplementary exercise, we document that workers are willing to pay to punish anonymous laborers who have accepted a wage cut. In addition, costly punishment occurs both for workers in one’s own village, and for workers in distant other labor markets—suggesting the internalization of norms in moral terms. Our findings support the presumption that collusive norms can develop even in the absence of formal labor institutions, and can play a role in constraining labor supply behavior at economically meaningful magnitudes.
“End Heuristics in Retrospective Voting: Evidence From a Conditional Cash Transfer Experiment” (with Sebastian Galiani, Nadya Hajj, Patrick J. McEwan, and Pablo Ibarrarán), Revise & Resubmit
Additional coverage: “Electoral Reciprocity in Programmatic Redistribution: Experimental Evidence”, VoxEU Post, 10/22/2016
Abstract: A Honduran field experiment allocated cash transfers that varied in their amount and timing. Voters were not indifferent to timing. Two groups of villages received similar cumulative payments per registered voter, but one received larger “catch-up” payments closer to election day. The latter treatment had larger effects on voter turnout and incumbent party vote share in the 2013 presidential elections. The results are consistent with lab experiments showing that individuals err in their retrospective evaluations of payment sequences. In Honduras, voters apparently used the amount of the final payment as an end heuristic for the sum of all payments received.
SELECTED RESEARCH IN PROGRESS
“Does Wage Compression Exacerbate Earnings Inequality?” (with Emily Breza and Supreet Kaur), In the field.
“Economic Opportunity and Motivation for Crime: Theft From Oil Pipelines in Nigeria"