Three Essays on Issues in Developing Economies: Credit Reforms, Elections and Wage Dispersion
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This dissertation presents three essays on some important issues in two developing economies, India and Ghana. In the first essay I analyze a major agricultural credit reform in India, known as the Kisan Credit Card (KCC) scheme, which intended to simplify the process of credit delivery in the agricultural sector. I use plausibly exogenous variation in the reach of the program to find the causal effects of the policy on agricultural output and technology adoption using a district panel data set. I also use a household dataset to analyze the effects of differential exposure to this policy on a wide range of household outcomes. I find evidence of increases in agricultural output of rice, which is the major crop of the country. I also find that on average the use of high yielding variety (HYV) seeds increases at the district level providing evidence of technology adoption. The increase in output at the district level is corroborated by suggestive increase in sales revenue and output of rice farmers at the household level. In addition, I find evidence that bank borrowing increased for households due to this program and the estimated effects on income and production are higher for such a sub-sample of borrowers. In the second essay, co-authored with Gergely Ujhelyi and Andrea Szabó, we try to answer the question as to why people vote? One possibility is that they derive consumption utility from doing so, but isolating this has proven empirically challenging. In this paper we study a recent natural experiment in India, where legislative elections have to provide a "None Of The Above" (NOTA) option to voters. Using the fact that NOTA cannot affect the electoral outcome we show that studying individual voters’ behavior with and without NOTA provides a way to identify various components of the consumption utility of voting. To address the challenge that individual votes are not observable, we borrow techniques from the Industrial Organization literature to estimate a structural model of voter demand for candidates and perform counterfactual simulations removing the NOTA option. We complement this with a reduced form analysis of NOTA in a difference-in-differences framework, exploiting variation in the timing of the reform created by the electoral calendar. Using both methods, we find that NOTA increased turnout. We find minimal substitution between candidates and NOTA, indicating that NOTA votes are cast by new voters who turn out to vote specifically for this option. This indicates the presence of an option-specific consumption utility of voting. In the final essay, I use a matched employer-employee dataset from the Ghanaian manufacturing sector to analyze earnings dispersion in Ghana from 1992-2003, a period post extensive economic reforms. I find that variance of earnings increased from 1992-1998 and decreased thereafter resembling an inverted u-shaped relationship. I use ANOVA and variance decomposition approaches to understand the underlying factors that led to such a pattern in earnings inequality. I find that between-firm factors explain this pattern more than within-firm factors. I also find that the mean earnings gap between workers above and below the 90th percentile of income distribution can explain majority of the initial surge in inequality (61%) but only explains a very small fraction of the eventual decline (9%). I run modified Mincerian regressions and decompose the variance components to find that the decline in earnings inequality is consistent with decline in variance of firm level earnings whereas variance of predicted wage from worker characteristics have increased. I also find suggestive evidence of changing patterns of worker-firm sorting which contributes to the decline in inequality.