Trade Liberalization, Poverty, and Inequality: Evidence from Indian Districts

Although it is commonly believed that trade liberalization results in higher GDP, little is known about its effects on poverty and inequality. This paper uses the sharp trade liberalization in India in 1991, spurred to a large extent by external factors, to measure the causal impact of trade liberalization on poverty and inequality in districts in India. Variation in pre-liberalization industrial composition across districts in India and the variation in the degree of liberalization across industries allow for a difference-in-difference approach, establishing whether certain areas benefited more from, or bore a disproportionate share of the burden of liberalization. In rural districts where industries more exposed to liberalization were concentrated, poverty incidence and depth decreased by less as a result of trade liberalization, a setback of about 15 percent of India's progress in poverty reduction over the 1990s. The results are robust to pre-reform trends, convergence and time-varying effects of initial district-specific characteristics. Inequality was unaffected in the sample of all Indian states in both urban and rural areas. The findings are related to the extremely limited mobility of factors across regions and industries in India. The findings, consistent with a specific factors model of trade, suggest that to minimize the social costs of inequality, additional policies may be needed to redistribute some of the gains of liberalization from winners to those who do not benefit as much.

Trade Adjustment and Human Capital Investments: Evidence from Indian Tariff Reform

Do the short and medium term adjustment costs associated with trade liberalization influence schooling and child labor decisions? We examine this question in the context of India's 1991 tariff reforms. Overall, in the 1990s, rural India experienced a dramatic increase in schooling and decline in child labor. However, communities that relied heavily on employment in protected industries before liberalization do not experience as large an increase in schooling or decline in child labor. The data suggest that this failure to follow the national trend of increasing schooling and diminishing work is associated with a failure to follow the national trend in poverty reduction. Schooling costs appear to play a large role in this relationship between poverty, schooling, and child labor. Extrapolating from our results, our estimates imply that roughly half of India's rise in schooling and a third of the fall in child labor during the 1990s can be explained by falling poverty and therefore improved capacity to afford schooling.

Imported Intermediate Inputs and Domestic Product Growth: Evidence from India

New goods play a central role in many trade and growth models. We use detailed trade and firm-level data from a large developing economy - India - to investigate the relationship between declines in trade costs, the imports of intermediate inputs and domestic firm product scope. We estimate substantial static gains from trade through access to new imported inputs. Accounting for new imported varieties lowers the import price index for intermediate goods on average by an additional 4.7 percent per year relative to conventional gains through lower prices of existing imports. Moreover, we find that lower input tariffs account on average for 31 percent of the new products introduced by domestic firms, which implies potentially large dynamic gains from trade. This expansion in firms' product scope is driven to a large extent by international trade increasing access of firms to new input varieties rather than by simply making existing imported inputs cheaper. Hence, our findings suggest that an important consequence of the input tariff liberalization was to relax technological constraints through firms’ access to new imported inputs that were unavailable prior to the liberalization.Intermediate Inputs, Firm Scope, Multi-product Firms, Product Growth, Gains from Variety, Endogenous Growth, Trade Liberalization, India

The Power of Political Voice: Women's Political Representation and Crime in India

Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, as it is driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation: large scale membership of women in local councils affects crime against them more than their presence in higher level leadership positions.crime; women’s empowerment; minority representation; voice

The Power of Political Voice: Women's Political Representation and Crime in India

Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation: large scale membership of women in local councils affects crime against them more than their presence in higher level leadership positions.crime, women's empowerment, minority representation, voice

Barriers to household risk management : evidence from India

Why do many households remain exposed to large exogenous sources of non-systematic income risk? This paper uses a series of randomized field experiments in rural India to test the importance of price and non-price factors in the adoption of an innovative rainfall insurance product. The analysis finds that demand is significantly price-elastic, but that even if insurance were offered with payout ratios similar to US, widespread coverage would not be achieved. The paper identifies key non-price frictions that limit demand: liquidity constraints, particularly among poor households, lack of trust, and limited salience. The authors suggest potential improvements in contract design to mitigate these frictions.Financial Literacy,Debt Markets,Access to Finance,Emerging Markets,Labor Policies