Saumitra Jha

Governance in the Gullies: Democratic Responsiveness and Leadership in Delhi's Slums

The authors use detailed ethnographic evidence to design and interpret a broad representative survey of 800 households in Delhis slums, examining the processes by which residents gain access to formal government and develop their own informal modes of leadership. While ethnically homogeneous slums transplant rural institutions to the city, newer and ethnically diverse slums depend on informal leaders who gain their authority through political connections, education, and network entrepreneurship. Education and political affiliation are more important than seniority in determining a leaders influence. Informal leaders are accessible to all slum dwellers, but formal government figures are most accessed by the wealthy and the well-connected.

Trade, Institutions and Religious Tolerance: Evidence from India

This paper analyses the incentives that shaped Hindu and Muslim interaction in Indias towns from the rise of Islam to the rise of European intervention in the 17th century; it argues that differences in the degree to which medieval Hindus and Muslims could provide complementary, non-replicable services and a mechanism to share the gains from exchange has resulted in a sustained legacy of religious tolerance. Due to Muslim-specific advantages in Indian Ocean shipping, incentives to trade across ethnic lines were strongest in medieval trading ports, leading to the development of institutional mechanisms that further supported inter-religious exchange. Using new town-level data spanning Indias medieval and colonial history, this paper finds that medieval trading ports were 25 percent less likely to experience a religious riot between 1850-1950, two centuries after Europeans disrupted Muslim dominance in overseas shipping. Medieval trading ports continued to exhibit less widespread religious violence during the Gujarat riots in 2002. The paper shows that these differences are not the result of variation in geography, political histories, wealth, religious composition or of medieval port selection, and interprets these differences as being transmitted via the persistence of institutions that emerged to support inter-religious medieval trade. The paper further characterises these institutions and the lessons they yield for reducing contemporary ethnic conflict.

Trade, Institutions and Ethnic Tolerance: Evidence from South Asia

I provide evidence that the degree to which medieval Hindus and Muslims could provide complementary, nonreplicable services and a mechanism to share the gains from exchange has resulted in a sustained legacy of ethnic tolerance in South Asian towns. Due to Muslim-specific advantages in Indian Ocean shipping, interethnic complementarities were strongest in medieval trading ports, leading to the development of institutional mechanisms that further supported interethnic exchange. Using novel town-level data spanning South Asias medieval and colonial history, I find that medieval ports, despite being more ethnically mixed, were five times less prone to Hindu-Muslim riots between 1850 and 1950, two centuries after Europeans disrupted Muslim overseas trade dominance, and remained half as prone between 1950 and 1995. Household-level evidence suggests that these differences reflect local institutions that emerged to support interethnic medieval trade, continue to influence modern occupational choices and organizations, and substitute for State political incentives in supporting interethnic trust.

Does Combat Experience Foster Organizational Skill? Evidence from Ethnic Cleansing during the Partition of South Asia

Can combat experience foster organizational skills that engender political collective action? We use the arbitrary assignment of troops to combat in World War II to identify the effect of combat experience on two channels that change local ethnic composition and future political control: ethnic cleansing and co-ethnic immigration. During the Partition of South Asia, we find that ethnically mixed districts whose veterans were exposed to greater combat exhibited greater co-ethnic immigration and minority ethnic cleansing, with minority out-migration achieved with lower loss-of-life. Further, where ethnic groups had been in complementary economic roles or the minority received greater combat experience, there was less ethnic cleansing. We interpret these results as reflecting the strategic role of ethnic cleansing and co-ethnic immigration by groups seeking political control and the role of combat experience in enhancing organizational skills at credibly threatening violence and engaging in collective action.

A Theory of Community Formation and Social Hierarchy

We analyze the classic problem of sustaining trust when cheating and leaving trading partners is easy, and outside enforcement is difficult. We construct equilibria where individuals are loyal to smaller groups – communities - that allow repeated interaction. Hierarchies provide incentives for loyalty and allow individuals to trust agents to extent that the agents are actually trustworthy. We contrast these with other plausible institutions for engendering loyalty that require inefficient withholding of trust to support group norms, and are not robust to coalitional deviations. In communities whose members randomly match, we show that social mobility within hierarchies falls as temptations to cheat rise. In communities where individuals can concentrate their trading with pre-selected members, hierarchies where senior members are favored for trade sustain trust even in the presence of proximate non-hierarchical communities. We link these results to the emergence of trust in new market environments and early human societies

Sharing the Future: Financial Innovation and Innovators in Solving the Political Economy Challenges of Development

The failure to align the incentives of self-interested groups in favor of beneficial reform is often considered a major cause of persistent underdevelopment around the world. However, much less is known about strategies that have been successful at overcoming such political economy challenges. One approach that holds much promise, and in fact appears to have had some historical success, is the provision of financial assets that align the interests of winners and potential losers from reform by providing claims on the future. This paper analyzes the role of financial instruments as a means for fostering broad political coalitions that favor beneficial reforms. It takes as a departure point the benchmark theory of portfolio choice, in which all agents hold the same (market) portfolio and thus all beneficial reforms are adopted. It then analyzes a range of historical cases in which innovative financial assets, often introduced by technocratic reformers, have succeeded at making politics less conflictual overtime, focusing on three revolutionary states that subsequently led the world in economic growth: England, the early United States and Meiji Japan. The paper draws upon the theory and the historical cases to assess the promise of finance in solving political economy challenges in contemporary settings.

Learning by Trading

Understanding financial concepts and participating in financial markets is increasingly important. Yet adults often lack the immediate incentives and opportunity to learn. We develop a simplified trading platform that incentivizes individuals to trade stocks for 4-7 weeks, with no additional educational content. Sampling 1035 prime age adults, our field experiment shows that trading significantly improves financial knowledge and attenuates the gender gap in both financial literacy, self-assessed financial knowledge and subsequent stock investment. It does this both by raising womens confidence and by mitigating mens overconfidence. Beyond this, the treatment compresses the gender gap in risk tolerance and trust, while making individuals more self-reliant in their financial decisions.How can we help individuals handle financial decisions in an increasingly complex environment? We explore an easily scalable avenue for improving financial understanding: learning by online trading in stocks. We randomly assign 1345 adults incentives and opportunities to trade stocks for 4-7 weeks, with no additional educational content. The treatment significantly improves financial literacy and attenuates the gender gap in self-assessed financial knowledge. Treated individuals are more likely to subsequently invest in stocks and less likely to seek external advice. The effects strengthen for those exposed to index funds, foreign assets, and rising or more volatile asset prices.

Trading for Peace

I examine the conditions under which trade can support peaceful coexistence and prosperity when particular ethnic groups are cheap targets of violence. A simple theoretical framework reveals that for a broad set of cases, while inter-ethnic competition generates incentives for violence, the presence of non-replicable, non-expropriable inter-ethnic complementarities become necessary to sustain peaceful coexistence over long time horizons. In addition to complementarity, two further conditions are important for deterring violence over time. When relatively mobile ethnic groups (eg immigrants) are vulnerable, a credible threat to leave can deter violence. When less mobile (indigenous) groups are vulnerable, high monitoring costs that allow them to withhold production can improve their gains from trade. I describe the implications for indigenous entrepreneurship and cultural assimilation, the development of local institutions supporting inter-ethnic trust, immigration policies and policies aimed at mitigating ethnic violence through financial innovations. I illustrate these implications using contemporary evidence and historical cases of organizations and institutions created to engender trade and support peace drawn from Africa, Asia Europe and Latin America.

'Unfinished Business': Historic Complementarities, Political Competition and Ethnic Violence in Gujarat

I examine how the historical legacies of inter-ethnic complementarity and competition interact with contemporary electoral competition in shaping patterns of ethnic violence. Using local comparisons within Gujarat, a single Indian state known for both its non-violent local traditions and for widespread ethnic pogroms in 2002, I provide evidence that where political competition was focused upon towns where ethnic groups have historically competed, there was a rise in the propensity for ethnic rioting and increased electoral support for the incumbent party complicit in the violence. However, where political competition was focused in towns that historically enjoyed inter-ethnic complementarities, there were fewer ethnic riots, and these towns also voted against the incumbent. These historic legacies proved to be important predictors of the identity of the winner even in very close electoral races. I argue that these results reflect the role local inter-ethnic economic relations can play in altering the nature and the benefits of political campaigns that encourage ethnic violence.