Working Papers and Projects

Judges, Lenders, and the Bottom Line: Court-ing Firm Growth in India

Type: Job Market Paper, 2019

Courts are considered important in the functioning of markets, and yet, there is limited causal evidence showing this. This paper estimates the causal effects of courts effectiveness on formal sector firm outcomes, illustrating ex-post contract enforcement in local credit markets as an important channel. To show this, I construct a novel panel dataset on court-level variables from 6 million trial-level data across 195 district courts in India and exploit quasi-random variation in judge vacancy for causal identification. There are three key implications of this paper. First, reducing marginal judge vacancy reduces court backlog by 6%. Second, this stimulates bank lending in local credit markets through improved liquidity from debt recoveries. Third, this affects credit availability, production, and profitability of firms located within the court’s jurisdiction. The results imply an 8:1 benefit to cost ratio of reducing marginal vacancy. Coverage: Ideas for India, Livemint

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Institutional Factors of Credit Allocation: Examining the Role of Judicial Capacity and Bankruptcy Reforms

Type: Working Paper, 2019

In this paper, I discuss the interaction between legal reforms in bankruptcy resolution and judicial capacity through the enforcement of creditor rights in trial courts on credit allocation in local markets. Poor creditor rights constrain the functioning of credit markets, that subsequently affects the availability of credit for productive uses. Can well-functioning courts facilitate the enforcement of creditor rights? How does this affect credit allocation? To study this, I use a difference in difference research design by comparing districts with high judge occupancy and those with low occupancy, before and after the 2016 national legislation on bankruptcy resolution in India that increased the rights of the creditors over stressed assets. There are three key findings. First, banks reduce lending towards unproductive uses such as lending to defaulting firms and increase lending based on capital efficiency in districts with better judicial capacity. Second, improved creditor rights coupled with better judicial capacity increases repayment. Third, banks are more likely to initiate and witness resolution of debt recovery related litigation in districts with better judicial capacity after the bankruptcy reform, suggesting that enforcement of creditor rights in well functioning trial courts plays an important complementary role. Finally, the paper concludes by examining credit misallocation, showing that good quality formal institutions are insufficient to fully address existing misallocation.

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Whither Justice?: Judicial Capacity Constraints Worsens Trial and Litigants’ Outcomes

Type: Working Paper, 2019

How does judge vacancy affect trial-level and litigant outcomes? Emerging economies like India suffer from state capacity constraints that affect economic outcomes. While insufficiency in the number of public teachers and health-workers in providing human capital development services has received increasing attention in economics, capacity constraints in the judiciary has rarely been discussed. In this paper, I examine the role of judge vacancy on the proceedings of ongoing trials and subsequent effects on litigant outcomes in India. The system of annual judge assignment to district courts shifts the existing high level of vacancies across courts that varies orthogonally to existing trial and litigant outcomes, enabling causal identification. There are following main findings: first, the duration of trial increases when an ongoing trial experiences judge vacancy relative to other trials in the same court that do not. Second, this shock negatively affects wage bill and decreases the asset value of plaintiff firms whereas the effects are smaller and statistically indistinguishable from zero for defendant firms. Third, the large negative effect for plaintiff firms is likely to occur due to increase in the number of dismissals resulting from vacancy. Given that smaller firms are more likely to use the formal judicial system as a plaintiff in the case of transactional disputes relative to larger firms, weaker judicial capacity disproportionately affects them leading to equity concerns.

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Got (Clean) Milk?: Transparency, Governance, and Incentives for Cleanliness in Indian Dairy Cooperatives (joint with Ashish Shenoy)

Type: Working Paper, 2019

We study how the mechanism of payment delivery affects the potential for collective action in rural Indian villages. To do so, we implement a randomized evaluation of a group-level incentive payment for lower bacteria count among village dairy cooperatives in Karnataka. The incentive structure tests whether cooperative members and management can sufficiently leverage local information and peer monitoring mechanisms to deliver a cleaner bulk product. We further vary whether incentive payments are announced publicly to cooperative members or revealed privately to cooperative management alone. Results show that group incentives are sufficient to improve production quality in village cooperatives, but that this result is sensitive to the way in which incentives are administered. When faced with the prospect of public announcement, managers in a third of cooperatives opt out of receiving incentive payments entirely, undermining any possible incentive effect. Dropout is concentrated among cooperatives with weaker management oversight. Link to AEA Trial Registry.

Assessing the Impact of Rehabilitating Small Scale Irrigation Reservoirs: A Study in Telangana (joint with Xavier Gine, Aprajit Mahajan and Anup Malani)

Type: Work in Progress, 2019

We evaluate the effects of rehabilitating local village level irrigation tanks on agricultural outcomes using a combination of observational and experimental approaches. Tank irrigation is a common (and climate friendly) mode of irrigation in Southern and Western India, which is based on impounding the surface run-off during rainy season for later use. However, since these are common pool resources, a lack of periodic upkeep had led to excessive silting and therefore, lowered capacity. Mission Kakatiya is a state-wide program in Telangana that aims to rehabilitate over 45000 tanks across the state in multiple phases. We make use of the staggered roll-out of earlier phases to study the impacts and understand the context of implementation in a differences-in-difference framework using a sample of 750 tanks. Further, we validate the findings using an experimental approach where we randomize the order of rehabilitation on a set of 92 tanks. Link to AEA Trial Registry.

The Power of Agency: Evidence from India (joint with Xavier Gine, Aprajit Mahajan, and Anup Malani)

Type: Work in Progress, 2019

Community-driven development (CDD) emphasizes a “bottom-up” approach focusing on community control over planning and implementation decisions to improve development outcomes. We propose to assess the value of community participation in choosing the location and implementation of local infrastructure projects by comparing a participatory “bottom-up” approach to the standard “top-down” planning and implementation where the community only plays a limited role. The context for the study is the construction of minor irrigation channels in the command area of small irrigation tanks in Telangana. The government has recently launched a program to rehabilitate the storage capacity of the tanks but has left the distribution of water from the tank to plots in the command area to the farmers. The research project thus varies the extent of community involvement over the choice and implementation of field channels and assesses its impact on irrigation resource allocation, agricultural outcomes, and continued maintenance. Link to AEA Trial Registry.

Gender Wage Gap in Agricultural Labor Markets in Rural India (joint with Vaishnavi Surendra)

Type: Work in Progress, 2018

We explore the determinants of gender wage gap in the agricultural labor markets in India and examine the role of social norms in perpetuating it. We use multiple approaches to address these questions including analyzing secondary data from ICRISAT VDSA Panel, collecting primary data via surveys to elicit expectations and behavioral parameters to complement the former data source, and finally in a related project, investigate the role gender norms in influencing such behavior perpetuating the wage gap and other labor market outcomes through a lab-in-field experiment.