Essays in Trade and Development Economics

Abstract

This dissertation is a collection of essays on two areas related to poverty in the developing world. Chapters 1 and 2 seek to understand a reason behind low incomes of farmers in India. Chapter 3 delves into studying the relationship between economic growth and fertility in the developing world.

In the first chapter, I argue that the market power of intermediaries or “middle-men” contributes to lowering farmer incomes in India. In particular, I study the role of spatial competition between intermediaries in determining the prices that farmers receive in India by focusing on a law that restricts farmers to selling their goods to intermediaries in their own state. I show that the discontinuities in market power generated by the law translate into discontinuities in prices. Increasing spatial competition by one standard deviation causes prices received by farmers to increase by 6.4%.

In the second chapter, I shed light on spatial and aggregate implications of the intra-country trade restriction of agriculture goods in India. I propose and estimate a quantitative spatial model of bargaining and trade. Using this structural model, I estimate that the removal of the interstate trade restriction in India would increase competition between intermediaries substantially, thereby increasing the prices farmers receive and their output. My estimates suggest that average farmer prices and output would increase by at least 11% and 7% respectively. The value of the national crop output would, therefore, increase by at least 18%.

In the third chapter, co-authored with Tom Vogl, we analyze how fertility change related to economic growth during 1960–2010. Although there were grave predictions of Malthusian catastrophe, fertility in the developing world more than halved while living standards more than doubled during this period. Using data on 2.3 million women from 255 household surveys, we find different responses to fluctuations and long-run growth, both heterogeneous over the lifecycle. Fertility was procyclical but declined and delayed with long-run growth; fluctuations late (but not early) in the reproductive period affected lifetime fertility. The results are consistent with models of the escape from the Malthusian trap, extended with a lifecycle and liquidity constraints.