Essays in development economics
The thesis consists of four independent chapters, each of which investigates a distinct research question pertinent to development economics. The first chapter explores the effect of access to financial services on agricultural production choices. The second chapter evaluates the effect of irrigation on the structural transformation of the rural economy. The third chapter explores whether intensification of agricultural production system is leading to a degradation of soil health. Finally, the fourth chapter evaluates voter behaviour in response to public investment in rural road construction. Chapter 1 – The Production Effects of New Banking Infrastructure: Evidence from Rural India We study the production effects of one of the largest bank branch expansion programs in history, implemented by the government of India during the 1980s. Combining policy-driven variation in branch expansion with newly-digitized data on bank lending and crop prices at the district-year level, we do not find evidence for a significant shift in agricultural output and inputs on average. Greater bank presence does promote resilience, however, by attenuating the effect of lagged rainfall shocks on output. This effect operates via changes in the incidence of cropping during the dry winter season, which makes use of costly irrigation resources. Chapter 2 – Agricultural Productivity and Local Economic Development: Evidence from Private Investment in Irrigation While a rich theoretical literature debates the mechanism by which industrialisation is preceded by growth in the agricultural sector, empirical evidence is required to provide insight on how the local economy responds to production shocks at varying spatial scale. In this paper, we study the average village level effects of private investment in groundwater irrigation on the structural transformation of the rural economy in India. Leveraging newly assembled data on groundwater depth and irrigation at the village level across the country, we exploit an absolute technological constraint imposed by the laws of physics on the operational capacity of pumps with depth of the water table in a fuzzy regression kink design. Our results show that increased irrigation significantly boosts agricultural land production. This translates into substantial localised average consumption gains, but no evidence of structural change -- the employment rate and sectoral labour allocation do not shift within the village. Though not transformative on aggregate, we do however find that farms and businesses have a marginally increased demand for labour. This additional demand is met by an increase in the share of full-time workers, as well as the share of non-hired family labour. In terms of demographics, access to groundwater irrigation leads to significantly higher population density, suggestive of a pooling-in of labour and/or increased fertility. Chapter 3 – Can Soils Keep Up? Impact of Intensive Agricultural Production Systems on Soil Fertility in India Agricultural yields have been falling across the developing world. The scientific literature predicts that poor soil nutrient management is becoming the limiting factor to agricultural productivity. In this paper, I study the average village level effects of intensive agricultural production -- driven by access to groundwater irrigation -- on soil fertility in India. As a source of exogenous variation in irrigation, I exploit an absolute technological constraint imposed by the laws of physics on the operational capacity of pumps with depth of the water table in a fuzzy regression kink design. My results indicate that irrigation -- by enabling farmers to introduce a second harvest during the dry winter months, is a catalyst to promoting agricultural intensification. Leveraging newly assembled data on soil nutrient content at the village level across the country, I find that while the share of soil samples deficient in macronutrients such as nitrogen significantly increases with irrigation use, there is a fall in the deficiency of some micronutrients. Chapter 4 – Paving the Road to Re-election The prevailing view in the economic literature is that voters are particularly myopic, encouraging governments to leverage short-term re-election strategies. Under such conditions, public capital investment with long-term rewards -- despite its central role in the process of sustained economic development -- may be neglected. In the context of India's rural road construction programme, we evaluate the role which large-scale public infrastructure initiatives have on the electoral accountability mechanism. Using a fuzzy regression discontinuity design with newly-digitised village-level voting outcomes from the 2014 general election, we find evidence of electoral support attributed to the political alliance which spearheaded the programme. On average six years following road construction to a village, the share of votes to the political alliance which implemented the programme increases by 7.1%. These political gains however, appear to be confined to candidates standing for re-election.