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Three Essays In Development Economics

Creative Commons 'BY' version 4.0 license

This dissertation consists of three self-contained chapters on development economics. The dissertation is focused primarily on the effects of road provision on rural households' decisions to invest in physical and human capital, specifically agricultural technology, health, and education. As a separate project, I also look at the impact of microcredit and microsavings on business-financing in sub-Saharan Africa.

In the first chapter, entitled "Do Rural Roads create Pathways out of Poverty? Evidence from India", I exploit a natural experiment from India, to evaluate the effect of paved feeder roads on 4 different aspects of the rural economy. I start by showing that improved roads led to a reduction in transportation costs, which is reflected in a reduction in price dispersion. I then show that these altered relative prices had an impact on households' incentives to invest in physical and human capital. Specifically, I find two main pieces of evidence: first, beneficiary farmers were more likely to adopt modern technologies, such as chemical fertilizer and hybrid seeds; and second, teenagers were more likely to drop out of school and join the labor force. I also find that improved access and reduced prices had important ramifications for household consumption. Households with greater exposure to the program were more likely to reduce their consumption of staples in favor of more nutritionally-dense, but perishable goods like meat and dairy. There was also a sharp increase in the variety of manufactured goods and processed foods being consumed by households.

In the second chapter, entitled "Paving the Way to Better Health: Quality and Quantity Evidence from India", I extend the same experiment and identification strategy to study the effects of road construction on rural households' health-seeking behavior. I find 3 main pieces of evidence. First, road construction led to better access to health care facilities, which translated into more hospital visits for prenatal care and child birth. Second, women thus included in the formal health care system were more likely to receive better care and have better health outcomes - a non-obvious result in light of the widespread notoreity of public service delivery in India. Third, I find evidence that rural households make a proximity-quality tradeoff, switching to better quality providers as barriers to access weaken.

In the third chaper, entitled "Financing Businesses in Africa: The Role of Microfinance", coauthored with Leora Klapper and Dorothe Singer of the World Bank, we evaluate the performance of microfinance in terms of providing business financing in 27 Sub-Saharan African countries. We utilize data from the 2009 and 2010 waves of the Gallup World Poll, a nationally representative survey of at least 1,000 individuals per country, conducted in up to 150 countries over the calendar year. This data, along with rigorous econometric evidence on microcredit usage from around the world, demonstrates that the economic gains from microcredit have been remarkably more modest than what was once believed. On the other hand, an analysis of microsavings along similar lines helps us conclude that it can prove to be a key financial innovation in terms of poverty alleviation and wealth creation. We also consider the challenges that the poor face in setting money aside, and discuss how policymakers can promote savings.

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