Mudit Kapoor

The Impact of Study Groups and Roommates on Academic Performance

This paper uses random assignment of students to investigate the impact of study groups and roommates on academic achievement. We find that informal social interaction with roommates has a significant positive impact on academic achievement while study group peers have no discernible impact, a result driven by group heterogeneity in ability. We also find that lower ability students benefit from high ability students but not vice versa.

Elasticity of Intertemporal Substitution in Consumption: Empirical Evidence from a Natural Experiment

This paper estimates the elasticity of intertemporal substitution in consumption (sigma). We exploit a natural experiment provided by a change in the Indian banking legislation which authorized all the deposit collecting institutions to offer a higher interest rate on deposits to citizens above 60 years of age. Using a difference in difference approach we compare the total consumption expenditure of households whose oldest living member is 60 or 61 years old with households whose oldest living member is 59 or 58 years old, before and after the policy change. We find the estimate of sigma to be equal to approx 2.2.

From Microfinance to m-Finance Innovations Case Discussion: M-PESA

there were just 10 telephone lines installed for every 1000 people in the Philippines. In Kenya, the ratio was 7 per thousand. In India, 6 per thousand. Compare that with the United Kingdom with 441 lines per thousand in 1990, or the United States with 545. For decades, public sector telephone companies in developing economies seldom had incentives or budgets to rapidly expand land line networks, and the private sector has had even less motivation to serve the costly-to-reach. The advent of mobile telephones has changed the equation. Mobile technologies allow countries to leapfrog over existing technologies, and they are leaping quickly. In 2006, an industry association counted 800 million telephones sold over the prior three years in developing countries. In January of this year alone, Indian companies added 7 million new subscribers. With cheap mobile telephones widely available, 40 percent of the population of the Philippines now has a telephone and over 200 million text messages are sent daily—at just 2 cents a message. In Africa, cell phone penetration jumped from 2 million subscribers in 1998 to 82 million by 2004, and the market continues to expand rapidly. One estimate places penetration in Africa in mid-2007 at 160 million subscribers. The spread of mobile technology offers more than a cheaper way to provide telephones. The technology also involves, in part, an expansion of human interaction, changing the nature of interaction as well as its level. The “mobile” element allows you to call your spouse when you’re stuck in traffic and running late; to keep track of your teenagers when they go out with friends; to form a potentially lifeMudit Kapoor, Jonathan Morduch, and Shamika Ravi

Determinants of Corruption: Government Effectiveness vs. Cultural Norms

This paper analyzes the parking behavior of United Nations diplomats in New York City and highlights the key limitation of an earlier work which claims cultural norms to be the significant determinant of corruption. We show that after controlling for Government Effectiveness index, which measures the quality of civil services and quality and quantity of public infrastructure in a country, the effect of culture on corruption becomes insignificant. However, the Country Corruption index and the Government Effectiveness index are strongly correlated which makes it difficult to identify the causal determinant of corruption. It is important to keep this correlation in mind before arriving at conclusions from empirical studies, because Country Corruption index could be proxying for other influences such as Government Effectiveness index, and ignoring this might lead us to falsely attribute the observed behavior to cultural or social norms alone. Understanding the relative importance of these potential causes of corruption is fundamental to policy recommendations.

The Effect of Interest Rate on Household Consumption: Evidence from a Natural Experiment in India

This paper estimates the change in consumption caused by a higher real interest rate. We exploit the change in Indian banking legislation which encourages all banks to offer a higher interest rate on deposits to citizens above sixty years. We use detailed monthly consumption data from the Indian National Sample Survey to calculate regression discontinuity estimates, based on age cut-offs. We find that an increase of 50 basis points in the interest rate on deposits leads to an immediate decline of consumption expenditure by 12 percent. A study of disaggregated monthly consumption expenditure reveals that the decline is primarily in non-food, non-essential items. We calculate similar estimates for data prior to the banking legislation and find no significant difference in the monthly consumption expenditure. These results are useful in understanding the permanent income hypothesis within the context of an ageing world population.

The Impact of NREGS on Urbanization in India

This paper tests the impact of National Rural Employment Guarantee Scheme (NREGS) on rural-urban migration and urban unemployment in India. We use the Harris-Todaro framework to analyze labor market outcomes of this policy intervention. Using data from two rounds of National Sample Survey, we exploit quasi experiment setting where the NREGS was launched in phases across districts, over time. Results show that the NREGS reduced rural-urban migration and urban unemployment in India. Results are heterogeneous as this job scheme reduced migration for employment and marriage, but not for education. It lowered migration of unskilled labor but did not affect skilled labor.

Women Voters in Indian Democracy: A Silent Revolution

We document the political participation of women in Indian democracy by comparing the turnout of women voters to men in the state elections from 1962 till 2012. Our analysis reveals striking findings: (1) There is a steady and a sharp decline in the gender bias in voting over time. In particular, we find that the sex ratio of voters (the number of women voters to every 1000 men voters) increased very impressively from 715 in the 1960s to 883 in the 2000s. (2) This phenomenon of declining gender bias in voting is across all the states, including the traditionally backward “BIMARU” states of Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh. (3) This decline is solely driven by the dramatic increase in women participation in the elections since the 1990s, while men participation has remained unchanged. (4) We also find evidence that women voters are agents of change - they vote differently from men and affect re-election prospects.

Why so Few Women in Politics? Evidence from India

In this paper we analyze women as political candidates in a representative democracy. Using 50 years of assembly elections data at the constituency level from the Indian states, we show that women are more likely to contest elections in those constituencies where gender ratio of the electors is less in favor of women. For example, women are more likely to contest elections in backward states like Bihar and Uttar Pradesh where the gender ratio of electors is in favor of men than in socially developed states like Kerala where the gender ratio of electors is more in favor of women. We present a “citizen candidates” model of representative democracy and show that our empirical results are consistent with the theoretical predictions of this model. Our results challenge existing policy of random reservation of seats for women.

The Impact of Credit Constraints on Exporting Firms: Empirical Evidence from India

This paper studies the causal impact of credit constraints on exporting firms. We exploit a natural experiment provided by two policy changes in India, first in 1998 which made small scale firms eligible for subsidized direct credit, and a subsequent reversal in policy in 2000 wherein some of these firms lost their eligibility. Using firms that were not affected by these policy changes as our control group we find that expansion of subsidized credit increased the rate of growth of borrowing and export earnings by 20 percent in each case. Interestingly, the subsequent policy reversal in 2000 had no impact on the rate of growth of total borrowings and the export earnings.

Measuring the risk on housing investment in the informal sector: theory and evidence from Pune, India

The authors provide an economic framework to analyze investment in informal housing in developing countries. They consider a simple model of investment in the housing market where investors can choose between two sectors-the formal sector, where physical investment faces no risk of destruction, and the informal sector, where investment in each period is subjected to an exogenous risk of destruction. Construction costs differ between the two sectors. All households are renters. Renters shop for dwelling attributes and do not care about the sector (formal or informal) itself. The model implies that returns on investment, measured by the rent-to-value ration, will be higher in the informal sector. The authors use a survey conducted by the World Bank in Pune, India in 2002. The sample comprises 2,850 households. This survey had the peculiarity of asking the households, regardless of tenure status, questions about the market rent and value of their dwelling. Thus they can calculate individual rates of return for each unit without facing the typical selection bias problems. Comparing the distributions of returns in the informal and formal sectors, the authors obtain the following results: 1) Rates of return are significantly higher in the informal sector, as predicted by the model. 2) These figures imply a perceived risk on housing investment in the informal sector equivalent to an annual destruction rate ranging between 1 and 2 percent. 3) The two distributions of rates of return present highly idiosyncratic components and are not well explained by variables proxying either the strength of informal property rights or lower perceived risks of eviction.