2025 - Unearthing Zombies (with Nirupama Kulkarni, Siddharth Vij and Kate Waldock) (Management Science; https://doi.org/10.1287/mnsc.2022.01356): Ideas for India
2023 - Cash Is King: The Role of Financial Infrastructure in Digital Adoption (with Bhavya Aggarwal and Nirupama Kulkarni) (Review of Corporate Finance Studies 12(4); 867-905)
2022 - Can Political Parties Improve Minority Well-being? Evidence from India's ``Silent Revolution (with Abhay Aneja) (Journal of Development Economics, 158; 102931)
2022 - Minority Political Parties and Minority Criminal Victimization: Evidence from India (with Abhay Aneja) (Journal of Law, Economics, and Organization, 38(3): 675-720.)
2021 - Consumption Tax Reform and the Real Economy: Evidence from India's Adoption of a Value-Added Tax (with Abhay Aneja and Nirupama Kulkarni) (Journal of Empirical Legal Studies, 18(3): 569-602.) AEA 2021 Poster
2012 - How Marginal Tax Rates Affect Families at Various Levels of Poverty (with Elaine Maag, C. Eugene Steuerle, and Calen Quakenbush), National Tax Journal, 65(4): 759-782.
1. When Credit Lines Open Fault Lines: Affirmative Lending, Minority Empowerment, and Communal Conflict in India (with Muhammad Yasir Khan)
Can access to credit markets improve the economic well-being and political standing of marginalized groups and affect social harmony in a fractured society? We examine this question by studying a policy intervention in India that asked commercial banks to increase lending to marginalized religious minority borrowers in ``minority concentration'' districts based on a random threshold of population. Using a regression discontinuity design, we identify substantial increases in minorities' access to bank credit, a higher monthly household consumption of minority households, and a reduction in the consumption inequality between minority and majority households. The increase in bank credit does not come at the cost of lower lending to non-minorities or higher rate of delinquencies among the minority borrowers. The policy also affects political outcomes of the minority group: elections are more likely to have minority candidates who receive a higher share of votes cast. These changes in the economic and political standing of the minority lead to an increase in violence, primarily in post-election periods suggesting a blow-back effect.
2. Ethnic Politics and the Distributional Effects of Free Trade: Evidence from India (with Abhay Aneja and Pavel Chakraborty)
Do globalization shocks affect ethnic politics? We examine this question in the context of India's 1991 trade liberalization episode, and study how tariff reforms contributed to the electoral success of caste-based parties during the 1990s. Combining industry-level tariffs with pre-reform employment shares in a shift-share design, we find that regions facing larger reductions in trade protection witnessed increased political support for political parties committed to the representation of marginalized caste groups. Increases in both caste-based party vote share and total seats are concentrated in areas that are more rural, lower skilled, and have larger concentrations of voters from marginalized caste groups. Examining mechanisms, we find tariff reforms to have widened the caste earnings gap, in large part due to the adverse consequences of tariff reforms falling on agricultural workers, and the over-representation of marginalized caste groups in farm work. The empirical findings are consistent with the explanation that the adverse effects of trade liberalization were disproportionately borne by historically marginalized citizens, who in turn voted for parties advocating their policy interests through targeted redistribution.
3. Bank Credit as a Constituent Service: Evidence from Indian State Legislators (with Jayati Gupta)
Does political alignment affect households' access to bank credit? Exploiting the incidence of tight electoral races between ruling and non-ruling parties in India's state-level elections, we find the marginal legislator representing the ruling party to generate a substantial increase in household bank borrowings. Borrowings from informal sources remain unaffected by shifts in political alignment and the increase in bank loans is driven by areas with a high concentration of state-owned banks. Comparing loans across bank and non-bank sources for the same household, the expansion in bank credit in response to political alignment can be attributed entirely to greater credit supply by lenders, as opposed to increased credit demand. Bank credit expansions are unaccompanied by a worsening in loan quality, negating political favouritism as a channel. Higher bank lending is also not restricted to periods before elections, ruling out a vote-buying motive. Instead, there is evidence of greater dispersion in bank loan sizes, suggesting an improvement in banks' local information gathering in response to political alignment. The results suggest that politicians combine local informational advantages with their influence over state-owned banks, and direct loans to creditworthy borrowers as a form of constituent service.
4. Good Regulation, Bad Politics: Evidence from India's Banking Clean-Up (with Vidhya Soundararajan)
What are the political costs of macro-prudential regulations? We study this in the context of India, where, following a rise in bank loan delinquency and the accompanying depletion of banks' capital, a set of early interventions were undertaken between 2015 and 2018 to restore the long-term health of major state-owned banks. Till the improvement of key regulatory ratios, banks were placed under the Prompt Corrective Action (PCA) framework, which severely restricted their ability to extend new loans. Exploiting regional variation in banks’ lending portfolios in 2013, we use a difference-in-difference design to compare the electoral performance of legislators representing the state incumbent party before and after the onset of PCA, across regions with a high concentration of banks affected by the PCA, relative to regions with a low concentration of PCA banks. Following PCA implementation, we identify a sharp reduction in support for the state incumbent in areas with a relatively high concentration of PCA banks. Event-study designs confirm the absence of differential trends in incumbent vote shares in elections conducted prior to the PCA. The reduction in incumbent vote shares was concentrated in areas where the costs of switching lenders were higher: namely, areas with low private bank presence, low density of private bank officers, and high information asymmetry. Overall, our results show that short-term electoral costs can deter political support for macro-prudential policies aimed at preserving the long-run health of the financial system.
5. Banks and Informality: Evidence from Dual Balance Sheets of Microenterprises (with Prabhat Barnwal, Ritam Chaurey and Reajul Alam Chowdhury)
We study the impact of the Indian Branch Authorisation Policy (BAP), which directed banks to open branches in ``underbanked” districts, on informal microenterprises. Using a regression discontinuity design, we find that microenterprises perform better, without any increase in formal registration. Second, counterintuitively, these enterprises report lower difficulty in credit access but do not increase bank or informal borrowings. We reconcile this with evidence from household balance sheets. Households increased their bank loans for non-farm businesses in underbanked districts. Our findings underscore the critical role of microenterprises' dual balance sheets in explaining the persistent informality within developing economies.
6. Banking the Underbanked: Capital Investment and Credit Constrained Firms (with Nirupama Kulkarni and Kanika Mahajan)
Inadequate banking infrastructure can exacerbate inequalities across firms. We exploit a place-based policy at scale -- India’s nationwide bank expansion policy in 2005 that incentivized banks to open branches in “underbanked” districts -- and extend a regression discontinuity design to identify substantial increases in capital expenditures and credit growth of manufacturing establishments post-intervention. We find that establishments most likely to be credit constrained i.e., small, young and those not publicly listed drive these effects. Using novel regulatory data we find evidence in support of two mechanisms -- increased hiring of bank officers and physical proximity of lenders to small, informationally opaque borrowers that explain the uptick in capital spending by small firms.
1. Trade and Credit (Re)-Allocation (with Pavel Chakraborty)
How do lenders respond to import competition? We study this question in the context of India using a novel firm-bank loan level database containing information for over 45,000 loans across bank and non-bank financial institutions. We find strong evidence of endogenous financial constraints and significant heterogeneity in lender responses to higher import competition. Private banks with a higher share of loans to firms exposed to higher import competition from China drop 25-30% of new credit with no effect for government-owned banks. And, the drop in the credit is driven by the intensive and not extensive margin. Private banks experience an increase in their non-performing loans, drop in profitability ratios, and borrowing thereby reducing their credit capacity. We confirm that our results are not driven by any ex-ante firm, industry, or bank characteristics. Lastly, we find that the reduction in credit negatively affects firm sales and profitability. To the best of our knowledge, this is one of the first papers to show that import competition can also alter lenders’ response depending on the sector of the firm to which it is connected.