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Essays on Development Economics

  • Author(s): Carpena, Fenella;
  • Advisor(s): Miguel, Edward;
  • et al.

This dissertation is a collection of empirical essays on three critical microeconomic development issues in India---energy, financial education, and food security---spanning households in both rural and urban settings.

In the first chapter, I examine the adverse consequences rural electrification. Electrification programs have increasingly attracted worldwide interest as a policy tool to boost economic growth and transform the lives of the poor. While some studies have shown that electricity provision brings positive impacts by, among others, increasing employment and improving health outcomes, the potential negative effects of electricity provision remain unclear. This chapter argues that electrification unfavorably affects consumers that do not adopt electricity despite its availability. I use a quasi-experimental setting provided by India's national rural electrification program to study the effects of electricity provision on the kerosene markets. I show that when electricity becomes available, the price of kerosene---a substitute good for lighting---increases by 5-10%. This price increase subsequently hurts consumers who do not take up electricity and continue to use kerosene. I present a model that explains why kerosene prices might increase, and I show that the decline in the kerosene market size is a potential channel through which electrification resulted in higher prices of kerosene.

The second chapter considers urban India and household financial well-being. This chapter, co-authored with Shawn Cole, Jeremy Shapiro, and Bilal Zia, employs a large-scale field experiment to study the attitudinal, behavioral, and cognitive constraints that may stymie the link between financial education and financial outcomes. Our research design combines financial education with (1) monetary incentives for correct answers to a financial knowledge test; (2) financial goal setting; and (3) personalized financial counseling. We find no effects of cash incentives on participants' financial knowledge, but significant effects of both goal setting and counseling on real financial outcomes. In particular, combining goal setting with financial education encouraged relatively simple follow-up actions such as writing a budget or starting informal savings. Counseling, in turn, enabled the poor to undertake costlier or more difficult financial activities, including opening a formal bank savings account. Together, these findings identify important complements to financial education that may successfully bridge the gap between financial knowledge and behavior change.

Finally, in the third chapter, I investigate the impact of dry rainfall shocks on food security among rural Indian households. Although a large literature has established that droughts lead to a significant decline in agricultural yields, much less is known about its effects on household nutrition. On the one hand, low levels of precipitation may reduce household food consumption, for instance, due to higher prices or lower income. But on the other hand, such harmful effects may not materialize because trade, food storage, or household savings may offset the impacts of low precipitation. My findings show that a dry rainfall shock negatively impacts households' diet quantity and quality considerably. These negative impacts are evident not only in households' aggregate expenditure, caloric, protein, and fat intake, but likewise when disaggregated across different types of food. Additionally, I find no statistically significant effect of a dry shock on prices. These results therefore suggest that prices may be unresponsive to precipitation in India, so that the negative impacts of drought on food consumption and nutrition more likely come through income rather than prices.

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