Prasad Krishnamurthy

Public Distribution System Reforms and Consumption in Chhattisgarh: A Comparative Empirical Analysis

Chhattisgarhs public distribution system reforms have been lauded as a model for the National Food Security Act, and as one that other states can emulate. Previous research has shown that PDS rice consumption increased in Chhattisgarh following reforms by the Raman Singh government, which began in 2004. However, one-third of PDS rice consumption growth in Chhattisgarh took place before 2004. This finding suggests that the pre-2004 reforms to fair price shop ownership and state procurement by the Ajit Jogi government contributed to PDS consumption growth. Our findings suggest that sustained reforms, when coupled with political and social will, can improve PDS access, and that improvements may not be substantial or sustained in the absence of these factors.

Food Price Subsidies and Nutrition: Evidence from State Reforms to India's Public Distribution System

We investigate whether food price subsidies affect household nutrition using a dramatic expansion of the availability of subsidized rice in the Indian state of Chhattisgarh in the early 2000s. Households in Chhattisgarh increased their consumption of pulses, animal-based protein, and produce relative to households in districts bordering the state as the availability of subsidized rice expanded. This increase is driven by households eligible for rice subsidies, and we do not find evidence that ineligible households changed their diet. These results contrast with recent studies suggesting that food subsidies have little effect on nutrition.

Rules, Standards, and Complexity in Capital Regulation

This article considers two fundamental issues in the design of bank capital regulation—the choice of a rule or standard and the level of complexity in that rule or standard—by revisiting the historical adoption of minimum-capital requirements and risk-based capital requirements. Both theory and the historical evidence suggest that a minimum-capital requirement is optimal when bank regulators seek to manage risks that are costly to estimate and that a risk-weighted capital requirement, in contrast, requires a precise understanding of both bank risk and the strategic response of banks to regulation. This article uses historical evidence to illustrate how cost-benefit analysis can be useful in forcing regulators to confront their theories with evidence. The analysis of rules, standards, and complexity that it develops can also inform capital regulation even when the conclusions of cost-benefit analysis are ambiguous.

Affirmative Action and Stereotypes in Higher Education Admissions

We analyze how admission policies affect stereotypes against students from disadvantaged groups. Many critics of affirmative action argue that lower admission standards cause such stereotypes and suggest group-blind admissions as a remedy. We show that when stereotypes result from social inequality, they can persist under group-blind admissions. In such cases, eliminating stereotypes perversely requires a higher admission standard for disadvantaged students. If a school seeks both to treat students equally and limit stereotypes, the optimal admission policy would still impose a higher standard on disadvantaged students. A third goal, such as equal representation, is required to justify group-blind admissions. Even when there is such a third goal, group-blind admissions are optimal only when the conflicting goals of equal representation and limiting stereotypes exactly balance. This is an implausible justification for group-blind admission because it implies that some schools desire higher standards for disadvantaged students. Schools that do not desire such higher standards will typically find some amount of affirmative action to be optimal.

George Stigler on His Head: The Consequences of Restrictions on Competition in (Bank) Regulation

Bank regulation used to be riddled with price, product, entry, and location restrictions. These restrictions were intended to prevent the recurrence of crises, such as those of the 1930s and 1940s. Over time, however, regulatory acquiescence to technological and institutional innovation undermined their ability to limit competition. An intellectual turn toward valorizing competition also hastened their demise. George Stigler, in particular, provided a trenchant critique of all such regulation as the product of pure rent seeking by private industry. This Article revisits the role of such restrictions on competition in banking. On the one hand, the public choice account of these restrictions as the outcome of private rent seeking is essentially true. On the other hand, their unintended historical result was to limit banks’ risk-taking incentives and to coopt banks into preventing regulatory arbitrage. Viewed from this perspective, these restrictions provide an important legal, political, and economic (LPE) model for how limits on competition could usefully complement current bank regulation. This model is one in which, to some extent, regulation facilitates rather than frustrates cartel formation in order to maintain a more stable equilibrium.

Food Price Subsidies and Nutrition: Evidence from State Reforms to India’s Public Distribution System

We investigate whether food price subsidies affect household nutrition using a dramatic expansion of the availability of subsidized rice in the Indian state of Chhattisgarh in the early 2000s. Households in Chhattisgarh improved their nutritional intake relative to households in districts bordering the state as the availability of subsidized rice expanded. This increase is driven by households most likely to be eligible for rice subsidies, and we do not find evidence that households least likely to be eligible changed their diet. These results differ from recent studies suggesting that food subsidies may have little effect on nutrition.

Banking Deregulation, Local Credit Supply, and Small Business Growth

The deregulation of bank branching in the United States reduced the sensitivity of small-business growth to local credit supply. In urban markets, within-state deregulation resulted in a 50 percent decrease in the effect of local deposit growth on employment and payroll growth. This effect is concentrated in establishments with 20–99 employees. These results hold for states that deregulated branching in response to litigation unrelated to economic conditions. These findings suggest that the large multimarket banks enabled by deregulation play an important role in insuring firms against local shocks to credit supply.