Doctoral Dissertation Research in Economics: Technology Adoption, Imperfect Asset Markets, and Risk in Economic Development: Evidence from Dairy Farming in India.

Yale University, New Haven CT

Investigators

Abstract

This research explores how common constraints on economic behavior such as (1) psychological biases, (2) inability to prove quality, and (3) inability to insure risks affect the development process. These projects will expand the literature on economic development by illustrating how these constraints affect the practice of dairy farming in rural India, and will improve policymaking by bringing attention to these constraints and their effects. The first project studies the "law of small numbers bias" in the context of artificial insemination of dairy animals in rural India. The "law of small numbers" bias is the human tendency to assume small samples of evidence adequately represent the underlying random process. Despite the proven benefits of artificial insemination, Indian farmers use artificial insemination in less than thirty five percent of their inseminations. This project will test whether dairy farmers who experience initial failure with artificial insemination are less likely to try the procedure again even when the initial failure was most likely by chance. This effect would suggest that farmers evaluate artificial insemination based on the small sample of their own experience. Given that most technologies go through a period of experimentation, the results of this study will be useful in understanding the dynamics of technology adoption in other contexts as well. The second project explores the relationship between quality uncertainty and market efficiency in two ways. The first test will estimate whether higher quality cows receive lower prices than expected because their owners have no way to prove their quality; if this is true, it provides another reason why households do not upgrade their stock of animals through artificial insemination. The second test will determine whether farmers wait for their cows to become pregnant before selling them as a way to prove their cow's fertility. If this effect is found, it suggests that quality uncertainty makes cows a sub-optimal savings device. The third project studies how dairying households respond to the risk associated with the gender of calves. The development economics literature has stressed the importance of risk in the lives of the poor because a household living near subsistence will find consumption fluctuations especially painful. Female calves are worth more than male calves because they will give milk and produce more calves. This project will (1) estimate the magnitude of "calf gender risk" that households face, (2) assess whether households use any cow trading strategies to hedge this risk, and (3) estimate whether households that are lucky to have female calves grow their herd sizes faster than households that have male calves. Broader Impact Approximately seventy million Indian households, which represent thirty six percent of the total number of households, engage in milk production. These households are typically poor, rural households that rely on milk production to supplement their volatile crop based incomes. This research will inform policymakers on increasing the efficiency of dairy farming and thereby contribute to poverty alleviation in India.