Seema Jayachandran

Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries

Productivity risk is pervasive in underdeveloped countries. This paper highlights a way in which underdevelopment exacerbates productivity risk. Productivity shocks cause larger changes in the wage when workers are poorer, less able to migrate, and more credit‐constrained because of such workers’ inelastic labor supply. This equilibrium wage effect hurts workers. In contrast, it acts as insurance for landowners. Agricultural wage data for 257 districts in India for 1956–87 are used to test the predictions, with rainfall as an instrument for agricultural productivity. In districts with fewer banks or higher migration costs, the wage is much more responsive to fluctuations in productivity.

The Price Effects of Cash versus In-Kind Transfers

This paper compares how cash and in-kind transfers affect local prices. Both types of transfers increase the demand for normal goods, but only in-kind transfers also increase supply. Hence, in-kind transfers should lead to lower prices than cash transfers, which helps consumers at the expense of local producers. We test and confirm this prediction using a program in Mexico that randomly assigned villages to receive boxes of food (trucked into the village), equivalently-valued cash transfers, or no transfers. The pecuniary benefit to consumers of in-kind transfers, relative to cash transfers, equals 11% of the direct transfer.

Odious Debt: When Dictators Borrow, Who Repays the Loan?

When the international community wants to put pressure on a govern ment that suppresses democracy and human rights, it commonly imposes economic sanctions. Traditional sanctions, however, are often either ineffective or inhumane. Targeted governments find ways around the sanctions, which offer third parties?smugglers and even other national governments enticed by the promise of large profits?incentives to evade them. And when the sanctions work, they often harm the targeted governments people, impoverishing them further through the loss of national income. We propose a new form of sanction?a loan embargo. Unlike a trade sanction, a loan embargo would be self enforcing. Not only would it not offer third parties incentives to evade it, it would eliminate the existing incentive of some creditors?banks, bondholders, or governments?to collude with dictators, issuing loans that enrich themselves. Because a loan embargo would be self-enforcing, it would be more effective than trade sanctions?and thus could help pressure dictators to undertake needed reforms by limiting their ability to borrow abroad and then loot borrowed funds?or use the

Does Contraceptive Use Always Reduce Breast-feeding?

Previous studies suggest that access to modern contraceptives can reduce breast-feeding rates because women who had been using breast-feeding to avoid pregnancy substitute away from it. This article shows that contraceptive use can also have a positive effect on breast-feeding. A mother often weans a child if she becomes pregnant again, which can occur sooner than desired if she lacks access to contraceptives. Thus, by enabling longer birth spacing and preventing unwanted pregnancies, contraceptive use allows for a longer duration of breast-feeding. This positive effect should primarily affect infants who are past the first few months of life because their mothers are more fecund then, and the negative effect should affect infants who are very young because the contraceptive property of breast-feeding is strongest then. I test for these dual effects using Demographic and Health Survey data for Indonesia. I find evidence of the positive birth-spacing effect: contraceptive use increases the likelihood that children continue to be breast-fed past age 1. There is also suggestive evidence of a negative substitution effect among infants age 3 months and younger.

Friendship at Work: Can Peer Effects Catalyze Female Entrepreneurship?

Does the lack of peers contribute to the observed gender gap in entrepreneurial success, and is the constraint stronger for women facing more restrictive social norms? We offered two days of business counseling to a random sample of customers of India’s largest women’s bank. A random subsample was invited to attend with a friend. The intervention had a significant immediate impact on participants’ business activity, but only if they were trained in the presence of a friend. Four months later, those trained with a friend were more likely to have taken out business loans, were less likely to be housewives, and reported increased business activity and higher household income. The positive impacts of training with a friend were stronger among women from religious or caste groups with social norms that restrict female mobility.

The Price Effects of Cash Versus In-Kind Transfers

This article examines the effect of cash versus in-kind transfers on local prices. Both types of transfers increase the demand for normal goods; in-kind transfers also increase supply in recipient communities, which could lead to lower prices than under cash transfers. We test and confirm this prediction using a programme in Mexico that randomly assigned villages to receive boxes of food (trucked into the village), equivalently-valued cash transfers, or no transfers. We find that prices are significantly lower under in-kind transfers compared to cash transfers; relative to the control group, in-kind transfers cause a 4% fall in prices while cash transfers cause a positive but negligible increase in prices. In the more economically developed villages in the sample, households’ purchasing power is only modestly affected by these price effects. In the less developed villages, the price effects are much larger in magnitude, which we show is due to these villages being less tied to the outside economy and having less competition among local suppliers.

Self-selection into payments for ecosystem services programs

Designers and funders of payments for ecosystem services (PES) programs have long worried that payments flow to landholders who would have conserved forests even without the program, undermining the environmental benefits (“additionality”) and cost-effectiveness of PES. If landholders self-select into PES programs based on how much conservation they were going to undertake anyway, then those who were planning to conserve should always enroll. This paper discusses the less-appreciated fact that enrollment is often based on other factors too. The hassle of signing up or financial costs of enrollment (e.g., purchasing seedlings) can affect who participates in a PES program. These enrollment costs reduce overall take-up, and, importantly, they can also influence the composition of landholders who select into the program—and thereby the program’s environmental benefits per enrollee. Enrollment costs can increase a program’s benefits per enrollee if they are systematically higher for (and thus deter enrollment by) landholders who would have conserved anyway. Alternatively, enrollment costs can dampen per-enrollee benefits if their correlation with status-quo conservation is in the opposite direction. We illustrate these points with evidence from two studies of randomized trials of PES programs aimed at increasing forest cover in Uganda and Malawi. We also discuss how in other sectors, such as social welfare, policy designers have purposefully adjusted the costs of program enrollment to influence the composition of participants and improve cost-effectiveness. We propose that these ideas for targeting could be incorporated into the design of PES programs.

Conditional versus Unconditional Means in Baseball

The hitting coach, former Red Sox slugger Jim Rice, rode [Scott Hatteberg] long and hard. Rice called him out in the clubhouse, in front of his teammates, and ridiculed him for having a batting average in the .270s when he hit .500 when he swung at the first pitch. “Jim Rice hit like a genetic freak and he wanted everyone else to hit the way he did,” Hatteberg said. “He didn’t understand that the reason I hit .500 when I swung at the first pitch was that I only swung at first pitches that were too good not to swing at.”