Aprajit Mahajan

Does Management Matter? Evidence from India*

A long-standing question in social science is to what extent differences in management cause differences in firm performance. To investigate this, the authors ran a management field experiment on large Indian textile firms, providing free consulting on modern management practices to a randomly chosen set of treatment plants and compared their performance to the control plants. They find that adopting these management practices had three main effects. First, it raised average productivity by 11 percent through improved quality and efficiency and reduced inventory. Second, it increased decentralization of decision making, as better information flow enabled owners to delegate more decisions to middle managers. Third, it increased the use of computers, necessitated by the data collection and analysis involved in modern management. Since these practices were profitable this raises the question of why firms had not adopted these before. Their results suggest that informational barriers were a primary factor in explaining this lack of adoption. Modern management is a technology that diffuses slowly between firms, with many Indian firms initially unaware of its existence or impact. Since competition was limited by constraints on firm entry and growth, badly managed firms were not rapidly driven from the market.

Identification and Estimation of Regression Models with Misclassification

This paper studies the problem of identification and estimation in nonparametric regression models with a misclassified binary regressor where the measurement error may be correlated with the regressors. We show that the regression function is nonparametrically identified in the presence of an additional random variable that is correlated with the unobserved true underlying variable but unrelated to the measurement error. Identification for semiparametric and parametric regression functions follows straightforwardly from the basic identification result. We propose a kernel estimator based on the identification strategy, derive its large sample properties, and discuss alternative estimation procedures. We also propose a test for misclassification in the model based on an exclusion restriction that is straightforward to implement. Copyright The Econometric Society 2006.

Child Nutrition in India in the Nineties

Abstract India experienced several years of fast economic growth during the 1990s, and according to many observers this period also saw a considerable decline in poverty, especially in urban areas. We use data from two rounds of the National Family and Health Survey to evaluate changes in nutritional status between 1992–93 and 1998–99 among children ages 0–3. We find that measures of short‐term nutritional status based on weight given height show large improvements, especially in urban areas. Height‐for‐age, an indicator of long‐term nutritional status, also shows improvement, but one limited to urban areas. However, we also document that the changes in nutritional status are much more favorable for boys than for girls. The gender differences in the changes over time appear to be driven by states in North India, where the existence of widespread son preference has been documented by an immense body of research.

Bednets, Information and Malaria in Orissa

We study the identification and estimation of key parameters in a basic model of technology adoption when specifically collected information on subjective beliefs and expectations about the technology’s impact is available. We discuss identification with both non-parametrically and parametrically specified utility as well as parametric and semi-parametric specifications for unobserved heterogeneity. We propose parametric and semi-parametric estimation methods to recover underlying preferences and use the model to study the adoption of bednets among poor households in rural Orissa (India). We carry out counterfactual exercises to examine the effects of price and belief changes on net ownership decisions. The results suggest that net purchase decisions are relatively insensitive to changes from current prices and beliefs. The methods proposes here should have applicability to other discrete choice settings with non-linear indices.

High prevalence of Wuchereria bancrofti infection as detected by immunochromatographic card testing in five districts of Orissa, India, previously considered to be non-endemic

India accounts for over one-third of the worlds burden of lymphatic filariasis (LF). Although most coastal districts of Orissa state (eastern India) are LF-endemic, the western districts of Orissa are considered non-endemic. During a large-scale insecticide-treated bed net/microfinance trial, we tested one randomly selected adult (age 15-60 years) for LF from a random sample of microfinance-member households in five districts of western Orissa, using immunochromatographic card testing (ICT). Overall, 354 (adjusted prevalence 21%, 95%CI 17-25%) of 1563 persons were ICT positive, with district-wide prevalence rates ranging from 15-32%. This finding was not explained by immigration, as only 3% of subjects had ever lived in previously known LF-endemic districts. These results therefore suggest ongoing autochthonous transmission in districts where LF control programs are not operational. Our results highlight the importance of broad, systematic surveillance for LF in India and call for the implementation of LF control programs in our study districts.

Child Nutrition in India in the Nineties: A Story of Increased Gender Inequality?

We establish some new interesting stylized facts on the changes in boy versus girl nutritional status in India during the nineties, a period of rapid economic growth. Our analysis is based on the comparison, over time and across genders, of the distribution of z-scores calculated for height and weight measures. Overall, we find that child nutrition improved substantially, but we also find that gender differences in nutritional status increased as well, with nutritional status improving substantially more for boys than for girls. Consistent with a large literature that shows the existence of a steep North-South gradient in gender inequality in India, we find that changes in nutritional status appear to be much more similar between genders in the South. We also estimate predicted changes in nutritional status based on changes in the distribution of household wealth (proxied by asset ownership) and a few other observed household characteristics. Actual changes appear to be relatively close to predicted ones in urban areas. For children living in the rural sector the results are more mixed, and we observe that actual changes in weight are quite larger than predicted ones for boys, while they are much worse than the predicted ones for girl height. We also estimate that the predicted changes are generally larger for boys than for girls.

Risk, Incentives and Contracts: Partnerships in Rio De Janeiro 1870-1891

We construct an individual-level data set of partnership contracts in late-nineteenth-century Rio de Janeiro to study the determinants of contract terms. Partners with limited liability contributed more capital and received lower draws for private expenses and lower profit shares than their unlimited partners. Unlimited partners in turn received higher-powered incentives when they contracted with limited partners than when they contracted with unlimited partners. A reform that changed the relative bargaining power further improved the terms of unlimited partners in limited firms. These findings highlight the roles of risk, incentives, and bargaining power in shaping contracts.

VAT in Emerging Economies: Does Third Party Verification Matter?

A key stated advantage of the value-added tax (VAT) is that it allows the tax authority to verify transactions by comparing seller and buyer transaction reports. However, there is limited evidence on how these paper trails actually affect VAT collections particularly in low compliance environments. We use a unique data set (the universe of VAT returns for the Indian state of Delhi over five years) and the timing of a policy that improved the tax authority’s information about buyer-seller interactions to shed light on this issue. Using a difference-in-difference strategy we find that the policy had a large and significant effect on tax collections from wholesale firms relative to retail firms. We also find significant heterogeneity with almost the entire increase being driven by changes in the behavior of the biggest taxpaying firms. We also find suggestive evidence that improvement in information and enforcement are complementary for a subset of firms.

Estimating Price Elasticities with Non-Linear Errors in Variables

This paper estimates a price elasticity using a flexible demand specification on survey data where prices are observed with errors and are correlated with household characteristics. The demand function is modeled as a polynomial/trigonometric in the unobserved true prices, and the form of the dependency between the observed prices and household characteristics is modeled parametrically. I identify and estimate the model by adapting the approach of Hausmann et al. (1991) and Schennach (2004). The flexible specifications allow us to observe that price elasticities vary across the price distribution, something missed in previous work using linear demand specifications.

Financial Inclusion and Contract Terms: Experimental Evidence From Mexico

This paper provides evidence on the difficulty of expanding access to credit through large institutions. We use detailed observational data and a large-scale countrywide experiment to examine a large banks experience with a credit card that accounted for approximately 15% of all first-time formal sector borrowing in Mexico in 2010. Borrowers have limited credit histories and high exit-risk – a third of all study cards are defaulted on or canceled during the 26 month sample period. We use a large-scale randomized experiment on a representative sample of the banks marginal borrowers to test whether contract terms affect default. We find that large experimental changes in interest rates and minimum payments do little to mitigate default risk. We also use detailed data on purchases and payments to construct a measure of bank revenue per card and find it is generally low and difficult to predict (using machine learning methods), perhaps explaining the banks eventual discontinuation of the product. Finally, we show that borrowers generating a favorable credit history are much more likely to switch banks providing suggestive evidence of a lending externality. Taken together these facts highlight the difficulty of increasing financial access using large formal sector financial organizations. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.