Research
Working papers
This study quantifies the response of consumption expenditures to transitory income shocks using monthly data for Indian households. First, I estimate the marginal propensity to consume (MPC) for a developing country using a semi-structural model. The results indicate a statistically significant MPC of 0.257 over a three-month period following a transitory shock. Second, using the same dataset for rural households in India and the corresponding time frame, I employ both a structural model and a quasiexperimental approach to estimate MPCs. These methods yield similar implied MPC values of 0.572 and 0.505, respectively, over the three months following a transitory income shock. Third, I document substantial heterogeneity in MPCs among Indian households. For example, the MPC ranges from 0.15 for high-income households to 0.845 for low-income households.
2. Early Urbanization and Regional Disparities within Countries (with Areendam Chanda and Dachao Ruan)
We explore the extent to which present day economic development at the subnational level is associated with urbanization in the mid-nineteenth century. Drawing on historical city data, we construct a variety of measures capturing city presence and populations in 1850 for 1,954 current first level administrative regions covering 128 countries. We find strong evidence of persistence in regional development that increases with city size. Using 2015 nighttime lights data as our baseline estimates, the presence of an 1850 city with a population between 5,000-20,000 is associated with a 6% higher GDP per capita, while a city with 100,000 population or more is associated with a 30% increase. Presence of the largest national city in 1850 confers a significant additional advantage to the region even 165 years later. Human Capital, as captured by the historical presence of universities is also important, but the independent effect of early urbanization remains.
3. Expectations and Consumption Behavior: Evidence From India (with Areendam Chanda)
This study evaluates whether consumer sentiment has a causal effect on consumption by utilizing the Euler equation and analyzing a household panel dataset. We find that micro expectations have a statistically significant effect on consumption growth, a relationship stronger than that observed with macro expectations. Additionally, we find that negative shocks have a statistically significant effect on consumption growth.