Submitted Papers

The Welfare Cost of Lawlessness: Evidence from Somali Piracy
joint with Tim Besley and Hannes-Felix Mueller.

Abstract: Establishing the rule of law is now widely regarded to be central to properly functioning economies. However, little is known about the cost of law and order break- downs. This paper studies a specific context of this by estimating the effect of Somali piracy attacks on shipping costs using data on shipping contracts in the dry bulk mar- ket. To estimate a treatment effect, we look at shipping routes whose shortest path exposes them to piracy and find that the increase in attacks in 2008 lead to around a 8 to 12 percent increase in costs. From this we calculate the welfare loss imposed by piracy. We estimate that generating around 120 USD million of revenue for Somali pirates led to a welfare loss of at least 900 USD million, making piracy an expensive way of making transfers.

Download the paper here.

Media coverage

  1. Financial Times, Tim Hartford, Lessons for pirates – from tax collectors, 18.01.2013.
  2. Foreign Policy, Paul Collier, It’s Lonely Being No. 1 – Is there hope for Somalia?, 18.06.2012.

Market Structure and Borrower Welfare in Microfinance
joint with Jon de Quidt and Maitreesh Ghatak.

Abstract: Motivated by recent controversies surrounding the role of commercial lenders in microfinance, we analyze borrower welfare under different market structures, considering a benevolent non-profit lender, a for-profit monopolist, and a competitive credit market. To understand the magnitude of the effects analyzed, we simulate the model with parameters estimated from the MIX Market database. Our results suggest that market power can have severe implications for borrower welfare, while despite possible information frictions competition typically delivers similar borrower welfare to non-profit lending. In addition, for-profit lenders are less likely to use joint liability than non-profits. 

Download the paper here.

Group Lending Without Joint Liability

joint with Jon de Quidt and Maitreesh Ghatak.

Abstract: This paper contrasts individual liability lending with and without groups to joint liability lending. By doing so, we shed light on an apparent shift away from joint liability lending towards individual liability lending. We show that individual lending with or without groups may constitute a welfare improvement so long as borrowers have sufficient social capital to sustain mutual insurance. Secondly, we explore how a purely mechanical argument in favour of the use of groups – namely lower transaction costs – may actually be used explicitly by lenders to encourage the creation of social capital.

Download the paper here

Can Workfare Programs Moderate Violence? Evidence From India

Abstract: This paper seeks to answer the question, whether the Indian National Rural Employment Guarantee scheme, designed as social insurance, can mitigate the effect of income shocks on insurgent violence in India and thus affect the dynamics of violence. The paper proceeds by establishing that the violence processes are functions of income or proxies of income. Exploiting variation within-district over time from a newly created conflict dataset covering the whole of India, I show that the introduction of NREGA has reduced the rainfall dependency of conflict.  This finding is robust to many ways of studying the data. I then explore whether this finding can be reconciled with the dynamics of NREGA take-up and the agricultural labour market. I show that NREGA take-up is highly rainfall-dependant; furthermore, I establish that NREGA functions as a stabiliser to agricultural wages, in light of rainfall shocks.

Download the paper here

Fracking Growth

Abstract: This paper estimates the effect of the shale oil and gas boom in  the United States on local economic outcomes. The main source of exogenous variation to be explored is the location of previously unexplored shale deposits. These have become technologically recoverable through the use of hydraulic fracturing and horizontal drilling. I use this to estimate the localised effects from resource extraction. A key observation is that, despite rising labour costs, there is no Dutch disease contraction in the tradable goods sector, while the non-tradable goods sector contracts. I reconcile this finding by providing evidence that the resource boom may give rise to local comparative advantage, through locally lower energy cost. This allows a clean separation of the energy price effect distinct from the local resource extraction effects.

Download the paper here

Abstract:  This paper answers the question whether extreme power rationing can induce changes in human fertility and thus, generate “mini baby booms”. We study a period of extensive power rationing in Colombia that lasted for most of 1992 and see whether this has increased births in the subsequent year, exploiting variation from a newly constructed measure of the the extent of power rationing. We find that power rationing increased the probability that a mother had a baby by 4 percent and establish that this effect is permanent as mothers who had a black out baby were not able to adjust their total long-run fertility. Exploiting this variation, we show that women who had a black-out baby find themselves in worse socio-economic conditions more than a decade later, highlighting potential social costs of unplanned motherhood.

Preliminary draft available here.

Hot Heads: Temperature, Income Shocks and Crime in India

joint with Jonathan Colmer and Benjamin Guin

Abstract: This paper tries to disentangle the direct and indirect effects of weather varia- tion on crime in India. Evidence from behavioural psychology suggests that weather shocks, in particular temperature variation, may have a direct effect on criminal be- haviour, especially for violent crimes. On the other hand, the economics literature has widely emphasised the role of economic shocks in affecting crime. We attempt to separate these effects by examining variation across crimes, seasonal variation related to agricultural production, rural vs. urban differences and whether temperature ef- fects are mitigated in states with strict prohibition laws. We find that an increase in the number of days in which temperature rises above 30 C (86 F) is associated with an increase in the number of murders and rapes, with no effect on other economic- based crimes. Furthermore, an increase in the number of days in which individuals are exposed to very hot temperatures, above 34 C (93.2 F) is associated with a reduction in these crimes. Finally, we observe that increased rainfall is associated with reductions in property based and economic crimes in support of a consumption smoothing channel.

Draft coming soon.

Developing a Micro-Level Conflict Data Set for South Asia

Abstract: This paper describes the use of sophisticated natural language processing tools to develop a district-level conflict dataset for South Asia, with a particular focus on India. The methodology used requires only a limited amount of work of hand-coding data. As the procedure is objective, erroneous coding of data by researchers can be avoided or at least limited, using such automation techniques. The ideal combination would leverage human ability to discover nuances in textual notions, with the scalability and objectivity of automated procedures. I then show how the dataset correlates with the Global Terrorism Database (GTD), another major conflict database measuring terrorist or insurgency violence. I highlight that there appear to be systematic differences between these two datasets. These differences likely arise from the primary data sources that feed into the GTD.

Microfinance, Market Structure, and Borrower Welfare: Regulatory Lessons from the Indian Crisis

joint with Jon de Quidt and Maitreesh Ghatak.

Abstract: In this article we review some of the open questions highlighted by the recent, Indian microfinance crisis. We draw out some of the key lessons learned about, the microfinance industry,  both in India and more broadly,  and their implications for borrowers. We illustrate the interplay of regulation,  market structure, and borrower welfare by surveying recent contributions that reflect the renewed, academic interest in microfinance. By putting this research into perspective with, the crisis,  we point out potentially important avenues for further research.

Preliminary draft available here.