Rohini Pande

Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment

Lack of access to finance is often cited as a key reason why poor people remain poor. This paper uses data on the Indian rural branch expansion program to provide empirial evidence on this issue. Between 1977 and 1990, the Indian Central Bank mandated that a commercial bank can open a branch in a location with one or more bank branches only if it opens four in locations with no bank branches. We show that between 1977 and 1990 this rule caused banks to open relatively more rural branches in Indian states with lower initial financial development. The reverse is true outside this period. We exploit this fact to identify the impact of opening a rural bank on poverty and output. Our estimates suggest that the Indian rural branch expansion program significantly lowered rural poverty, and increased non-agricultural output.

Can mandated political representation increase policy influence for disadvantaged minorities? Theory and evidence from India

A basic premise of representative democracy is that all those subject to policy should have a voice in its making. However, policies enacted by electorally accountable governments often fail to reflect the interests of disadvantaged minorities. This paper exploits the institutional features of political reservation, as practiced in Indian states, to examine the role of mandated political representation in providing disadvantaged groups influence over policy-making. I find that political reservation has increased transfers to groups which benefit from the mandate. This finding also suggests that complete policy commitment may be absent in democracies, as is found in this case. (JEL D72, D78, H11, H50)

Why Have Women Become Left-Wing? The Political Gender Gap and the Decline in Marriage

The last three decades have witnessed the rise of a pohtical gender gap in the United States wherein more women than men favor the Democratic party. We trace this development to the decline in marriage, which we posit has made men richer and women poorer. Data for the United States support this argument. First, there is a strong positive correlation between state divorce prevalence and the political gender gap—higher divorce prevalence reduces support for the Democrats among men but not women. Second, longitudinal data show that following marriage (divorce), women are less (more) likely to support the Democratic party.

THE POLITICS OF PUBLIC GOOD PROVISION: EVIDENCE FROM INDIAN LOCAL GOVERNMENTS

This paper uses village and household survey data from South India to examine how political geography and politician identity impacts on public good provision. We provide evidence that the nature of this relationship varies by type of public good. For high spillover public goods residential proximity to elected representative matters. In contrast, for low spillover public goods sharing the politicians group identity is what matters. (JEL: D78, H40) Copyright (c) 2004 The European Economic Association.

Institutions and Development: A View from Below

In this paper we argue the case for greater exploitation of synergies between research on specific institutions based on micro-data and the big questions posed by the institutions and growth literature. To date, the macroeconomic literature on institutions and growth has largely relied on cross-country regression evidence. This has provided compelling evidence for a causal link between a cluster of ‘good’ institutions and more rapid long run growth. However, an inability to disentangle the effects of specific institutional channels on growth or to understand the impact of institutional change on growth will limit further progress using a cross-country empirical strategy. We suggest two research programs based on micro-data that have significant potential. The first uses policy-induced variation in specific institutions within countries to understand how these institutions influence economic activity. The second exploits the fact that the incentives provided by a given institutional context often vary with individuals’ economic and political status. This can help us better understand how institutional change arises in response to changing economic and demographic pressures.

Repayment Frequency and Default in Microfinance: Evidence from India

In stark contrast to bank debt contracts, most micro-finance contracts require that repayments start nearly immediately after loan disbursement and occur weekly thereafter. Even though economic theory suggests that a more flexible repayment schedule would benefit clients and potentially improve their repayment capacity, micro-finance practitioners argue that the fiscal discipline imposed by frequent repayment is critical to preventing loan default. In this paper we use data from a field experiment which randomized client assignment to a weekly or monthly repayment schedule and find no significant effect of type of repayment schedule on client delinquency or default. Our findings suggest that, among micro-finance clients who are willing to borrow at either weekly or monthly repayment schedules, a more flexible schedule can significantly lower transaction costs without increasing client default. (JEL: O12, O16, O22) (c) 2008 by the European Economic Association.

Parochial Politics: Ethnic Preferences and Politician Corruption

This paper examines how increased voter ethnicization, defined as a greater preference for the party representing ones ethnic group, affects politician quality. If politics is characterized by incomplete policy commitment, then ethnicization reduces average winner quality for the pro-majority party with the opposite true for the minority party. The effect increases with greater numerical dominance of the majority (and so social homogeneity). Empirical evidence from a survey on politician corruption that we conducted in North India is remarkably consistent with our theoretical predictions.

Understanding Political Corruption in Low Income Countries

Building on the large and growing empirical literature on the political behavior of individuals in low income countries this chapter seeks to understand corruption through the lens of political economy -- particularly in terms of the political and economic differences between rich and poor countries. Our focus is on the political behavior of individuals exposed to democratic political institutions. We review the existing literature on the determinants of individual political behavior to ask whether we can understand the choice of political actors to be corrupt and, importantly, of other individuals to permit it, as a rational response to the social or the economic environment they inhabit. We also discuss the implications of this view of corruption for anti-corruption policies.

Unmarried Parenthood and Redistributive Politics

Political survey data for nine West European countries show that women have become increasingly left-wing compared to men, and that this trend is positively correlated with the decline in marriage in these countries. This pattern is mirrored in German longitudinal data (GSOEP), where transitions out of marriage make women, but not men, significantly more left-leaning. Analysis of public spending data for high-income OECD countries (1980-98) suggests that the political impact of non-marriage extends to the allocation of State resources. We find that the relationship between the decline in marriage and public spending on children is U-shaped, that is, declines in marriage first reduce and then increase such spending. This finding both supports the hypothesis that the decline in marriage lies behind the political gender gap and highlights the salience of popular support, rather than need, in determining public spending.

Repayment Flexibility Can Reduce Financial Stress: A Randomized Control Trial with Microfinance Clients in India

Financial stress is widely believed to cause health problems. However, policies seeking to relieve financial stress by limiting debt levels of poor households may directly worsen their economic well-being. We evaluate an alternative policy – increasing the repayment flexibility of debt contracts. A field experiment randomly assigned microfinance clients to a monthly or a traditional weekly installment schedule (N = 200). We used cell phones to gather survey data on income, expenditure, and financial stress every 48 hours over seven weeks. Clients repaying monthly were 51 percent less likely to report feeling “worried, tense, or anxious” about repaying, were 54 percent more likely to report feeling confident about repaying, and reported spending less time thinking about their loan compared to weekly clients. Monthly clients also reported higher business investment and income, suggesting that the flexibility encouraged them to invest their loans more profitably, which ultimately reduced financial stress.