Stephen D. O'Connell

How Do Electricity Shortages Affect Industry? Evidence from India

We estimate the effects of electricity shortages on Indian manufacturers, instrumenting with supply shifts from hydroelectric power availability. We estimate that India’s average reported level of shortages reduces the average plant’s revenues and producer surplus by five to ten percent, but average productivity losses are significantly smaller because most inputs can be stored during outages. Shortages distort the plant size distribution, as there are significant economies of scale in generator costs and shortages more severely affect plants without generators. Simulations show that offering interruptible retail electricity contracts could substantially reduce the impact of shortages.

Local industrial structures and female entrepreneurship in India

We analyze the spatial determinants of female entrepreneurship in India in the manufacturing and services sectors. We focus on the presence of incumbent female-owned businesses and their role in promoting higher subsequent female entrepreneurship relative to male entrepreneurship. We find evidence of agglomeration economies in both sectors, where higher female ownership among incumbent businesses within a district-industry predicts a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries (e.g., those sharing similar labor needs, industries related via input-output markets) predict greater relative female entry rates even after controlling for the focal district-industrys conditions. The core patterns hold when using local industrial conditions in 1994 to instrument for incumbent conditions in 2000-2005. The results highlight that the traits of business owners in incumbent industrial structures influence the types of entrepreneurs supported.

Can Political Empowerment Help Economic Empowerment? Women Leaders and Female Labor Force Participation in India

This study examines whether political empowerment of women affects their economic participation. In the context of mandated political representation reform for women in India, the study finds that the length of exposure to women politicians affects overall female labor force participation. These effects seem to arise through direct and indirect channels: political representation of women directly affects hours of work assigned to women under the recent national public works program, the Mahatma Gandhi National Rural Employment Guarantee Scheme. In addition, the level of access to public goods, as influenced by exposure to women leaders over time, increases the likelihood of women being engaged in the labor force. The findings suggest that womens participation in politics could be a useful policy tool to increase both the supply of and the demand for labor market opportunities for women, potentially helping to stem Indias declining female labor force participation rate.

Can Service Be a Growth Escalator in Low-Income Countries?

Several high-level reports have raised the concern that low-income countries, especially in Africa, are experiencing premature de-industrialization. The concern is that they are growing without transforming. Have the latecomers to development missed the boat? Although these concerns are well placed, Africas growth seems to be benefitting from a structural transformation of a different kind. The manufacturing sector as a share of gross domestic product has shrunk, but countries have benefitted from the third industrial revolution with globalization of services being at the forefront of this technological revolution. As services produced and traded across the world expand with globalization, the possibilities for low-income countries to develop based on their comparative advantage expand. That comparative advantage can just as easily be in services as in manufacturing. Comparative advantage need not be a one-trick pony.

The exceptional persistence of India's unorganized sector

The transformation of Indias unorganized sector is important to its modernization, growth, and attainment of regional economic equality. This paper documents several key facts about Indias unorganized sector in manufacturing and services. First, the unorganized sector is large, accounting for more than 99 percent of establishments and 80 percent of employment in manufacturing. Second, the unorganized sector is stubbornly persistent -- it accounted for 81 percent of manufacturing employment in 1989 and 2005. Third, this persistence is not due to particular subsets of industries or states, as most industries and states show limited change in unorganized sector employment shares. Fourth, the degree to which localized unorganized activity exists is important as it is associated with weaker production functions for manufacturing firms. Building from these facts, the paper investigates conditions promoting transformation by state-industry. Decomposition exercises find that both within and between adjustments for state-industries weakly reduce unorganized sector shares. The aggregate persistence instead comes from the covariance term, where fast-growing state-industries witness rising unorganized sector activity. Regressions quantify that growth in the organized sector by state-industry reduces the unorganized sector employment share, but only marginally reduces employment levels in unorganized activity. Analysis of the establishment size distribution highlights that entrepreneurship and larger organized sector plants are most important for transitions in the manufacturing sector, while small establishments play a key role in the services sector.

Female business ownership and informal sector persistence

The informal sector in India has been exceptionally persistent over the past two decades. Is this a bad thing? Not necessarily. This paper shows that a substantial share of the persistence in Indias unorganized manufacturing sector is due to the rapid increase in female-owned businesses. Had womens participation remained in the proportion to male-owned businesses that was evident in 1994, the unorganized manufacturing sector would have declined in share rather than increased. Most of these new female-owned businesses are opened in the household and at a small scale, about a third of the size of a typical male-owned business in the informal sector. Yet, it appears that these businesses offer economic opportunities not otherwise present and a transition for some women from unpaid domestic work.

Input Usage and Productivity in Indian Manufacturing Plants

This paper analyzes the scale and productivity consequences of varied input use in Indian manufacturing using detailed plant-level data. Counts of distinct material inputs are higher in urban settings than in rural locations, unconditionally and conditional on plant size, and they are also higher in the organized sector than in the unorganized sector. At the district level, higher input usage in the organized sector is generally observed in wealthier districts and those with greater literacy rates. If looking within states, the usage is more closely associated with electricity access, population density, and closer spatial proximity to one of Indias largest cities. Plants in the organized sector utilizing a greater variety of inputs display higher productivity, with the effects mostly concentrated among smaller plants with fewer than 50 employees. For the unorganized sector, there is little correlation of input counts and local conditions, for better or for worse, and a more modest link to productivity outcomes.

Structural transformation in Africa : a historical view

This paper presents evidence suggesting that the relationship between income and economic structure is shifting over time, with countries across the income distribution uniformly increasing the share of labor in service sectors and an increasingly less stark relationship between manufacturing intensity and gross value added per capita. The paper then assesses historical patterns of productivity convergence at a more detailed sector disaggregation than has been previously available. The analysis finds suggestive evidence that, at least in recent decades, convergent pressures in services industries are stronger than in manufacturing. Focusing on African economies, the paper presents a country-by-country historical analysis of structural change over the past four decades. Given the varied patterns and trends in structural change across African countries, it is difficult to characterize structural change from a single, continent-wide perspective. Some countries saw an early transition of labor out of agriculture, with manufacturing absorbing this labor in the decades prior to the 1990s, while another group of countries saw a later transition out of agriculture, where the services sector played a large role in labor reallocations in the 1990s and 2000s. Finally, the paper provides a country-by-country structural transformation scorecard to assess patterns of structural change in jobs and growth.

Public and private investments in innovation capabilities : structural transformation in the Chilean wine industry

This paper assembles novel data on the Chilean wine industry to investigate the role of investments in knowledge capital on sales growth in domestic and international markets. The study uses archival data collected from the Government of Chile to compile and categorize public expenditures and programs supporting the Chilean wine industry over the period of 1990-2012 into investment in different types of knowledge capital. These spending categories are related to industry-level sales growth. The paper finds that the most important correlate is spending on research and development. The study also uses data from a new survey of Chilean wine firms to capture information on firm-specific investments in knowledge capital. The findings show that investments in collaboration capital, in particular hiring foreign consultants, as well as participation in international wine fairs are the strongest correlates of growth in export sales, while spending on aspects of branding (local advertising and brand design) are the strongest correlates of domestic market sales growth.

Friend or Foe or Family? A Tale of Formal and Informal Plants in India

This paper examines the interaction between formal (organized) and informal (unorganized) plants in the manufacturing sector in India. How has the size and productivity of the plants in the organized sector affected the plants in the unorganized sector? How have informal plants affected formal plants? Are the magnitudes of the effects symmetric in either direction? The evidence shows that there are positive horizontal and vertical spillovers in each direction. Informal firms are an important supplier of inputs to formal firms. Employment and output in the organized sector is greater in those states in India that have a greater presence of unorganized suppliers of inputs. Conversely, unorganized employment and output are greater in states that have a greater presence of organized buyers of inputs. But there are two important asymmetries in the relationship between the organized and unorganized sectors. First, the unorganized sector is much more dependent on and responsive to organized sector presence than vice versa. Second, unorganized sector productivity is dependent on and responsive to organized sector productivity and presence but the reverse is not true.