The Equilibrium Impact of Agricultural Support Prices and Input Subsidies (with Anand Chopra and Lalit Contractor)
Abstract: We study the implications of agricultural subsidies for the agricultural productivity gap, defined as the ratio of labour productivity in non-agriculture to that in agriculture, and consumer welfare. We develop a dynamic general equilibrium model with individuals heterogeneous in productivity, landholdings, and assets in the presence of mobility costs, financial frictions and incomplete asset markets. We allow for endogenous sorting between sectors: agriculture and non-agriculture, and between the production of crops: staple and cash. The benchmark economy features two tax-financed subsidy programs: input price subsidies that reduce the cost of intermediate inputs for all farmers, and a minimum support price program for the procurement of staples. The model is calibrated to match a mix of macro data and quasi-experimental evidence pertaining to the Indian economy. Our counterfactual results highlight that removing either program reduces agricultural productivity and increases the agricultural productivity gap. However, abolishing either policy boosts welfare primarily by reducing the tax burden, which disproportionately benefits the asset-poor households. Thus, we identify a tension between promoting productivity and improving welfare in the context of agricultural policy intervention.
Scaling Up to Decrease the Divide: Firm size and Female Employment (with Kanika Mahajan)
Abstract: Using firm and individual-level data, we provide reduced-form evidence suggesting a positive relationship between relative female employment and firm size. We then use a difference-in-difference strategy exploiting a natural experiment in Indian labor law amendments that raised firm size thresholds for regulatory compliance. We document a resulting 4.2% increase in female worker share in the treated states, along with a 5% and 15% rise in employment and output, respectively. Larger firms providing amenities like maternity benefits, transport, and paid leave, valued more by women, likely drive these results. Our findings suggest that policies promoting firm growth can enhance female employment.
Intoxicant Consumption Dynamics under Alcohol Prohibition: Evidence from India (with Ronit Mukherji)
Abstract: This paper examines the effects of an alcohol prohibition law in Bihar, India, on intoxicant consumption. We implement a dynamic difference-in-difference estimation strategy using longitudinal data on monthly household expenses, exploiting state-level variation in policy exposure and household-level variation in alcohol use. We document that alcohol-consuming households in Bihar reduced their spending on tobacco products following the ban announcement, indicating complementarity between alcohol and other intoxicants; however, after its strict enforcement, when alcohol was unavailable, these households gradually increased their tobacco consumption. We find reallocation in healthcare spending: urgent medical expenses decrease with increased spending towards positive lifestyle changes.
Female Labor Supply and Jobless Recovery
Abstract: Female labor force participation rose steadily over the U.S. post-war era until the late 1980s. Since then, the upward trend has largely subsided. Concurrent with this leveling off, starting in 1990, recessions in the U.S. have featured jobless recoveries. This paper considers the connection between these two recent patterns, examining both empirically and through the lens of a general equilibrium macroeconomic model, the extent to which the weakened trend contributes to slower recoveries. My empirical analysis shows that young, married women with children were the primary drivers of aggregate employment recoveries prior to 1990. These findings inform the development of a theoretical model that I use to study the interaction between female and male labor supply at the household and at the aggregate level. My model predicts that post-1990 aggregate employment recoveries were significantly slower than pre-1990 recoveries due to the weakened trend for young married women with children and is thus consistent with my empirical evidence both in the aggregate and in which individual groups show these changes. Decomposing the relative contributions of several underlying factors responsible for this pre-1990s rise, the model predicts that the narrowing gender wage gap is the most important factor in the overall increase. However, until the mid-1980s, when the upward trend in female labor supply was the strongest and recoveries in aggregate employment were brisk, a reduction in the number of young children for married women was the most crucial factor. With this insight, I use my framework to discuss policy implications for mitigating jobless recoveries.
Gender, Marriage, and Portfolio Choice: Role of Income Risk (with Anand Chopra)- Revised draft coming soon
Abstract: This paper examines the source of gender and marital status differences in portfolio choices across U.S. households. Using the Panel Study of Income Dynamics (PSID) and the Survey of Consumer Finances (SCF), we find evidence that single female-headed households invest the least in risky assets, followed by single male-headed households. Further, married households invest the most in risky assets. Towards explaining these differences in portfolio allocations, we further document that women earn lower incomes and face higher individual income risk relative to men. To quantitatively investigate the importance of these gender differences in income profiles, we develop a two-asset incomplete market life-cycle model with heterogeneous households. Using the model, we show that the gender wage gap is important in explaining portfolio choice differences during the initial years of working life; however, higher income risk leads to lower risk-taking behavior by female-headed households afterward. We also show that dual-earner households exhibit higher investment in risky assets compared to single-earning couples, which is consistent with our empirical findings, indicating a role for spousal insurance.