“Bargaining and Welfare: A Dynamic Structural Analysis of the Autorickshaw Market”
January 2011 Draft
Bargaining for retail goods is ubiquitous in developing countries, where traders spend substantial amounts of time haggling over purchases. Would welfare be higher if trade was conducted at fixed prices instead? The answer is theoretically ambiguous: if bargaining is a low cost form of price discrimination, it may lead to greater trade and welfare and even approximate the optimal incentive compatible outcome. However, if bargaining imposes large utility costs on the participants, then a fixed price may be preferable. I develop the tools to resolve this question, specifying a model of repeated trade with hidden valuations adapted to the context of bargaining, and developing a dynamic structural estimation technique to infer the underlying parameters of the market. I then apply these techniques to bargaining data I collected from the market for local autorickshaw transportation in Jaipur, India.
“Structural Tests for Oligopoly in Commodities Storage in Local India Agricultural Markets”
Development practitioners and economic theorists have both been concerned with the problem of market power in commodity storage. However, until now there has been no means to test for imperfect competition of this type that does not require data on commodity sales and stocks–data which are usually unavailable. This paper develops a dynamic structural technique that both extends and improves earlier estimators
in order to estimate the degree of oligopoly in a market using only price series, and applies this to data on rice prices from rural markets in India, a context where there is much suggestive evidence and policy concern about market power in commodities storage. This draft presents preliminary results from one market, and outlines directions for future research.
Preliminary – contact author for latest version
“Experimental vs. Structural Estimates of the Return to Capital in Microenterprises”
April 2011 Draft
This paper carries out the first comparison of production function parameters estimated by structural techniques with those estimated via randomized instrumental variables using a unique dataset and field experiment performed by . In the context of a simple model of a household firm, I discuss the coefficients that each approach estimates, and the assumptions necessary to interpret those coefficients as the structural parameters of the model. I find that the values of structural and experimental estimators that most plausibly estimate the same parameters are indeed statistically and economically similar, suggesting that in some contexts structural models of production functions may be effective in recovering the parameters of production functions in the context of developing markets. These parameters may then be used to address questions relating to firm productivity and capital allocation that are both central to the study of firms in development, and potentially difficult to identify using randomized variation alone.
“Making Police Reform Real: The Rajasthan Experiment”
with Abhijit Banerjee and Esther Duflo
Feb 2012 Draft
Institutions in developing countries, particularly those inherited from the colonial period, are often thought to be subject to strong inertia. This study presents the results of a unique randomized trial testing whether these institutions can be reformed through incremental administrative change. The police department of the state of Rajasthan, India collaborated with researchers at US and Indian universities to design and implement four interventions to improve police performance and the public’s perception of the police in 162 police stations (covering over one-fifth of the State’s police stations and personnel): (1) placing community observers in police stations; (2) a freeze on transfers of police staff; (3) in‐service training to update skills; and (4) weekly duty rotation with a guaranteed day off per week. These reforms were evaluated using data collected through two rounds of surveys including police interviews, decoy visits to police stations, and a large-scale public opinion and crime victimization survey—the first of its kind in India. The results illustrate that two of the reform interventions, the freeze on transfers and the training, improved police effectiveness and public and crime victims’ satisfaction. The decoy visits also led to an improvement in police performance. The other reforms showed no robust effects. This may be due to constraints on local implementation: The three successful interventions did not require the sustained cooperation of the communities or the local authorities (the station heads) and they were robustly implemented throughout the project. In contrast, the two unsuccessful interventions, which required local implementation, were not systematically implemented.