Hari K. Nagarajan

Land Reforms, Poverty Reduction, and Economic Growth: Evidence from India

Abstract Recognition of the importance of institutions that provide security of property rights and relatively equal access to economic resources to a broad cross-section of society has renewed interest in the potential of asset redistribution, including land reforms. Empirical analysis of the impact of such policies is, however, scant and often contradictory. We use panel household data from India, together with state-level variation in the land reform implementation, to address some of the deficiencies of earlier studies. Results suggest that land reform had a significant and positive impact on income growth and accumulation of human and physical capital. Policy implications are drawn, especially from the fact that the observed impact of land reform seems to have declined over time.

Determinants and Consequences of Land Sales Market Participation: Panel Evidence from India

Summary Although opinions on impacts of land market transfers are sharply divided, few studies explore welfare- and productivity-impact of land sales markets over a long time horizon and national scale. A panel spanning almost 20 years, together with an indicator of climatic (rainfall) shocks, allows us to assess factors underlying market-mediated land (sale and purchase) transactions and their impact on productivity and equity. Economic growth emerges as a key driver of such markets although shocks, their effect mitigated by bank presence, also increased market activity. Land sales improved productivity and helped purchasers, many of them formerly landless, to accumulate non-land assets and enhance their welfare.

Wage Discrimination in India's Informal Labor Markets: Exploring the Impact of Caste and Gender

Although there has been considerable interest in wage discrimination in India, available studies have largely dealt with formal rather than informal markets that are of little relevance for the poorest people. Focusing on India’s informal labor markets leads to three findings of interest. First, gender wage discrimination is larger in informal than in formal labor markets, resulting in losses that are larger than receipts from one of the country’s most important safety-net programs. Second, economic growth will not make gender discrimination in wage labor markets disappear. Finally, contrary to what is found for gender, the hypothesis of no significant wage discrimination based on caste cannot be rejected.Although there has been considerable interest in wage discrimination in India, available studies have largely dealt with formal rather than informal markets that are of little relevance for the poorest people. Focusing on India’s informal labor markets leads to three findings of interest. First, gender wage discrimination is larger in informal than in formal labor markets, resulting in losses that are larger than receipts from one of the country’s most important safety-net programs. Second, economic growth will not make gender discrimination in wage labor markets disappear. Finally, contrary to what is found for gender, the hypothesis of no significant wage discrimination based on caste cannot be rejected.

Components of the wholesale bid-ask spread and the structure of grain markets: the case of rice in India

We investigate the market microstructure of the wholesale markets for rice in India. We propose a general method of splitting the wholesale bid-ask spread into its three constituent components: the order processing costs, the adverse information costs and the inventory holding costs. The bid-ask spread reflects the extent of information asymmetry and order imbalance in the market place. However, the dynamics of the bid-ask spread can only be understood in terms of the movement of its components; hence the importance of isolating these components. We use Zellners seemingly unrelated regressions to split the bid-ask spread into the three components in the rice markets of 14 major centers in India. The results are then linked to the production and consumption patterns in the market areas covered by these centers.

Does Land Fragmentation Increase the Cost of Cultivation? Evidence from India

Abstract To appreciate overall impacts of fragmentation, underlying channels, and potential heterogeneity by holding size, we distinguish average fragment size and mean inter-fragment distance as two aspects of this phenomenon. Estimating a cost function with associated input demand equations on a large nationally representative Indian survey, robust to endogeneity, suggests that fragmentation’s main impact is to reduce mean plot size below the threshold for mechanisation. Higher inter-fragment distances increase costs for larger holdings, but by a much smaller magnitude. Implications as to when programmes to consolidate holdings may make sense and ways to ensure their sustainability are discussed.

Spatial Inequality in Rural India: Do Initial Conditions Matter?

Disparities in income and living standards across countries and between regions within countries (spatial inequality) have been the subject of much debate and research in recent years. Spatial inequality is a construct arising out of variations in economic endowments, geography and, socio-political structure across the relevant economic space. It is typically measured as an outcome of differences in mean income or consumption levels across the economic space. The extant literature has examined some of its causes. These include globalisation, variations in availability and quality of infrastructure, and, persistent conflicts. If a significant proportion of overall inequality is spatial in nature then this can produce the preconditions for chronic poverty. Persistent spatial inequality reduces household level mobility in terms of income, occupation etc. Policies aimed at reducing chronic poverty will then have to focus on structural rather than household specific factors. This paper contributes to the literature in number of ways. First, it helps focus attention on the fact that meaningful comparison of incomes across space can be done in the context of representing these incomes as pure returns to location. Differences in income can then be described as resulting from different neighbourhood structures. Second, it is able to control for a wide range of village-level structural variables, thereby overcoming the common problem of unobserved heterogeneity. In the cross-country and cross-region inequality among broad geographic entities, such as states or districts Indian villages mimic small countries that operate in relative autarky (Foster and Rosenweig 2003). Finally, this paper shows that local endowments matter in so far as the local economies interact with a wider geographic space. Such interactions could produce positive as well as negative externalities, some of which are responsive to policy.

Wholesale spreads and the dynamics of retail price volatility in Indian rice markets

A general model is proposed of asymmetric price transmission to examine the volatility of retail spreads in vertical markets, with endogenous overshooting of the wholesale spreads. The model is tested with Indian data and significant asymmetries are discovered.

Noisy Vertical Markets

In vertical markets volatility at one level of the market may transmit itself to another level. This paper examines the linkages that exist between spreads at different levels of the market hierarchy in Indian rice markets. It highlights the behavior of spreads in the presence of information asymmetry. This causes spreads to overshoot their equilibrium values. Second, we model possible differences between the reaction to an upward revision of the spread from that to a downward revision. We also propose policy prescriptions such that the policy maker can target specific levels of the market verticality given an understanding of the process of transmission and the magnitude of noise trading.

Vulnerability and Responses to Risks in Rural India

Using Vulnerability as Expected Utility (VEU) analysis that permits the decomposition of household vulnerability into its components on a unique data set this paper demonstrates that in rural India household vulnerability is most explained by poverty and idiosyncratic components. So far as risk coping strategies go households rely heavily on informal instruments such as their own saving, transfers or capital depletion. However, they also try to cope with covariate risks by participating in government programmes. Further, household consumption is highly covariate with income. This implies that existing informal insurance instruments are not sufficient to protect household consumption against income shocks. Government sponsored coping strategies reduce the idiosyncratic and risk component of vulnerability. Hence, an important policy implication of our analysis is that the government should provide readily accessible and well targeted public safety nets. The existing informal strategy is not very effective as a consumption insurance mechanism. Although the government coping programme is found to reduce vulnerability access to such programmes is constrained. Expansion of government sponsored coping programmes is likely to protect households effectively from negative shocks.

The evolution and structure of the two-wheeler industry in India

This paper studies the evolution of the competitive structure of the two-wheeler industry in India. The evolution of the industrys competitive structure is traced using Kendall’s Index of Rank Concordance and the Evans-Karras test of convergence. The industry seems to be characterized by oligopoly with the onset of economic reforms not making much difference to industrial structure. Convergence of sales and capacity at the level of the industry is conditional while it is absolute at the level of the segment.