123703 S pe on ci In ResearchDigest al d Fo ia World Bank cu s VOLUME 12 NUMBER 2 WINTER 2018 A Long History of World Bank Research Focusing on India I ndia is the world’s seventh largest of the main target countries for ad- IN THIS ISSUE economy and among the fastest dressing income disparity and poverty. growing large ones, with average World Bank research has shown that A Long History of World Bank Research annual growth of about 7 percent. the poorest 40 percent of households Focusing on India … page 1 Yet India is also home to the world’s in India are stymied by limited access largest concentration of poverty, with to quality education, health care, and Looking Back on Two Decades of Poverty more than 250 million people liv- financial services. Studies have also and Well-Being in India … page 2 ing below the international poverty shown that inequality reinforces the line of $1.90 a day. Indeed, one in cost and cultural barriers to socioeco- For India’s Rural Poor, Growing Towns Matter More Than Growing four people living in extreme pov- nomic mobility for poor households. Cities … page 3 erty around the world is Indian. And This issue of the Research Digest income inequality has worsened in features recent Policy Research Weighing the Cost-Effectiveness of recent years. According to the World Working Papers that empirically ana- Strategies to Reduce Teacher Inequality Lab’s World Inequality Report lyze the persistence of poverty and Absence in India … page 4 2018, around 56 percent of national inequality in India and discuss ways income accrues to the top 10 percent of overcoming these challenges. One Flies without Borders: Lessons from of Indian earners and only 15 percent paper shows that India’s large invest- Chennai on Improving Municipal to the bottom 50 percent. The growing ments in education have led to gains Public Health Services … page 5 inequality, particularly since the open- in school quality, but argues that ef- ing of the economy in the early 1990s, fective school monitoring is critical Are Invisible Walls Inhibiting Internal has emerged as a potential fault line for reducing teacher absence. Another Migration in India? … page 6 in the economic and social progress paper demonstrates that there is no made in the past 60 years. Moreover, shortage of resources or ideas in India Making It Easier to Apply for a Bank poverty reduction efforts are con- in the area of public health services; Account in India … page 7 strained by some aspects of the coun- the challenge is spreading the word Managing Food Price Volatility try’s culture and institutions as well as about success stories so that others in India … page 8 by inadequate physical and financial can learn from them. Comparing expe- infrastructure. rience in two metropolises, it shows Uncertainty and Inefficiency in South The World Bank’s twin goals of that Delhi could substantially improve India’s Groundwater Markets … page 9 ending extreme poverty and ensur- its delivery of public health services ing shared prosperity for the bottom simply by replicating the Chennai Deliberative Inequality: A Text-as-Data 40 percent globally depend on their model. Two other papers investigate Study of Village Assemblies success in India. The Bank’s research cultural impediments to poverty in India … page 10 program has made substantial con- reduction. Several others highlight tributions to this endeavor. The Bank policy successes and failures in differ- Cultural Impediments to Cooperating: has had a strong research program ent areas. These studies and others A Study of Low- and High-Caste Men in India ever since President Robert offer innovative ideas on a multitude in Rural India … page 11 McNamara created a separate depart- of issues crucial for the overall devel- ment for development policy research opment of India. Recent Policy Research Working in 1970. Under the leadership of Hollis Papers on India … page 12 Chenery, the first to head the depart- ment, the Bank expanded its economic research and focused on India as one 2 World Bank ResearchDigest Looking Back on Two Decades of Poverty and Well-Being in India Poverty reduction has accelerated in if economic growth had been more The sheer scale of poverty in the India. But there is still room to make inclusive. While consumption levels country remains sobering. In 2012 the gains more inclusive and more have increased rapidly in recent years, India was home to 262 million people the incomes of the poorest 40 per- living below the international poverty responsive to growth cent of households have grown more line of $1.90 a day. Put differently, one I slowly than the average income of the in four people living in extreme pov- ndia made rapid progress in reduc- overall population. On this measure erty across the world is Indian. (India’s ing absolute poverty in the two de- of “shared prosperity”—or equitable poverty rate at $1.90 a day might be cades leading up to 2012. As mea- improvement among all people—India significantly lower if new consump- sured by India’s official poverty line, lags behind countries at a similar tion estimates for 2009/10 and 2011/12 based on daily per capita consump- stage of development. Although India from the National Sample Survey tion expenditure, the share of the ranked 16th among 51 middle-income Organization are used. Based on these population living in poverty fell by half countries in average consumption measures, India would account for a between 1994 and 2012, from 45 per- growth during 2005–12, it ranked only smaller share of the world’s extreme cent to 22 percent. During this period 27th within this group in consumption poor, roughly 15 percent, but would 133 million Indians—more than the growth among the poorest 40 percent still be home to the largest number.) total population of Japan or Mexico— of households. Poverty is closely intertwined with emerged from poverty. Moreover, the Moreover, even the rapid reduction geography. Poor people are still far pace of poverty reduction accelerated in poverty during 2005–12 was less more likely to be found in India’s vil- over time: it was three times as fast than would be expected given India’s lages—home to 80 percent of its between 2005 and 2012 (the years for high rate of economic growth during poor—than in its cities. And its poorer which the latest government data are that period. The responsiveness of states are not catching up with their available) as in the previous decade. poverty to per capita GDP growth in more prosperous counterparts. If the At this pace India’s reduction in ex- India was lower than the average for current trend of slower poverty reduc- treme poverty, pegged at $1.90 a day, developing countries. A couple of tell- tion in the poorer states persists, pov- matched or exceeded the average rate ing indicators reveal the extent of this erty will become increasingly concen- of decline for the developing world as divergence: while India ranked among trated in a handful of states. In 2012 a whole and for middle-income coun- the top 10 percent of developing coun- just three large, lower-income states tries as a group (figure 1). tries in per capita GDP growth during (Uttar Pradesh, Bihar, and Madhya But as a recent paper by Narayan 2005–12, it ranked just above the 60th Pradesh) accounted for 44 percent of and Murgai shows, the reduction in percentile in the rate of poverty reduc- India’s poor people. poverty did not benefit all segments of tion. And this relationship between Nonetheless, the story of India’s the population equally. The decline in growth and poverty reduction varied transformation remains an optimistic poverty could have been much greater widely between Indian states. one. Although the full potential of eco- nomic growth to reduce poverty has Figure 1. Extreme Poverty Rate in India and Selected Country Groups, 1993–2011 yet to be unleashed, the links between Share of population below $1.90 a day (%) growth and poverty reduction have 50 strengthened. India Lower middle income 40 Middle income Developing world 30 20 10 0 1993 1996 1999 2002 2005 2008 2011 Ambar Narayan and Rinku Murgai. 2016. Source: World Bank, World Development Indicators database (accessed November 16, 2015). “Looking Back on Two Decades of Poverty and Note: Based on the international poverty line of $1.90 a day (2011 PPP). Figures are available at roughly three-year intervals during Well-Being in India.” Policy Research Working 1990–2008; for India actual survey years are used. Paper 7626, World Bank, Washington, DC. World Bank Research Digest 3 For India’s Rural Poor, Growing Towns Matter More Than Growing Cities In India today, the growth of poverty reduction. One difficulty arises seems to have the most significant secondary towns may do more to because India measures city growth relationship with rural poverty reduc- reduce rural poverty than the growth (in terms of population rather than tion. The authors consistently find this economic output) only once every 10 effect using different specifications, of big cities years, using the census. Much of the while they find little apparent effect on S variation in rural poverty reduction oc- the rural sector from the brightness of ince beginning economic re- curs within the 10-year period between lights coming from urban areas. forms in earnest in the early censuses and so would be missed by Comparison of the effects of big- 1990s, India has made much studies that rely on the census data city economic growth on rural poverty progress in reducing poverty, with to measure urban growth. The lack with those of secondary towns leads to faster rates of decline than in the of agglomeration-level boundaries, some consistent associations, indicat- prereform era. The indications are such as the metropolitan statistical ing that the growth of towns matters that urban economic growth since the areas in other countries, also means far more than does the growth of cities early 1990s has had a greater effect that India’s census data correspond to for reducing rural poverty in India. This in reducing poverty—and that this administrative rather than economic effect is close to inequality-neutral, be- has come with larger gains for India’s definitions of cities. Another difficulty ing associated with neither higher nor rural poor. Does the pattern of urban is the absence, unlike in China, of eco- lower inequality within rural areas. growth—that is, whether it emanates nomic statistics that are both timely At India’s current stage of develop- from large cities or smaller towns— and spatially detailed (such as at the ment the growth of secondary towns matter for its effect on the rural poor? city level). may do more to reduce rural poverty Which type of urban growth is more Lacking spatially disaggregated than the growth of big cities. This poverty reducing?. production data, the authors use pattern may not hold at all stages of Secondary towns may be more night lights data as an indicator of development; indeed, the theoretical tightly connected to the surrounding growth in urban incomes, distinguish- model suggests that cities may eventu- rural hinterland than are cities, so ing between growth on the extensive ally take over from towns as the drivers growth in small towns may have more and intensive margins and between of rural poverty reduction. For now, effect on rural poverty. But growth in the growth of cities and of second- however, the authors’ findings suggest larger cities may also spill over to the ary towns. Night lights are used to that along with promoting agricultural towns and rural areas both through demarcate the edge of cities for exam- and rural development, India should labor market adjustment and because ining effects of expanded areas (the look to its towns, not its cities, to help the larger cities may also generate extensive margin), and to calculate the reduce rural poverty. larger trade and remittance flows. intensity of light—the “digital num- Investigating these questions in ber”—emanating from within these a recent paper, Gibson, Datt, Murgai, boundaries (the intensive margin). and Ravallion show that even in a sim- These new measures of urban eco- ple theoretical model that allows for nomic activity using night lights data only labor adjustment as a mechanism are econometrically related in a spatial for spillovers, it is ambiguous whether Durbin fixed-effects model to subna- the growth of cities matters more tional rural poverty estimates between for the rural poor than the growth of 1993/94 and 2011/12. Poverty estimates towns. The model produces conditions are formed at a finer spatial resolution under which a given proportionate (59 National Sample Survey regions) gain in the output of big cities has than in the existing literature, which less impact on the rural wage rate relies on estimates at the state level. than does growth in the output of At the heart of the empirical strategy secondary towns. But this is only one is the fact that for some regions the possible outcome. Even in this simple urban growth has come mainly from a model, city growth could more effec- brightly lit big city like Bangalore while tively “trickle down” to the rural poor. for other regions it has come mainly Ultimately, it is an empirical question from the expansion of less brightly lit as to which type of urban growth is secondary towns, as in inland Tamil John Gibson, Gaurav Datt, Rinku Murgai, and better for the rural poor. Nadu. Martin Ravallion. 2017. “For India’s Rural Poor, Empirically, it is difficult to relate Results show that it is the expan- Growing Towns Matter More Than Growing Cit- variation in the growth of different sion of India’s cities and other urban ies.” Policy Research Working Paper 7994, World types of cities to variation in rural areas on their extensive margin that Bank, Washington, DC. 4 World Bank ResearchDigest Weighing the Cost-Effectiveness of Strategies to Reduce Teacher Absence in India Hiring more teachers increases the government’s greater focus on primary resulting reduction in teacher absence time teachers spend with students. education in the past decade led to would lead to savings in wasted salary So does hiring more inspectors. substantial improvements in input- amounting to Rs 4.5 billion a year—10 based measures of school quality as times the cost of hiring more supervi- Which is more cost-effective? well as in administrative and commu- sory staff. Alternatively, hiring enough M nity monitoring. additional teachers to achieve the ost discussions about increas- Now the not so good news. Even same effective student-teacher ratio ing the time that teachers as all these input-based measures of would involve estimated salary costs of spend with children revolve schooling improved, there was little Rs 5.7 billion a year. Thus as a strategy around class size and student-teacher decline in the rate of teacher absence. to reduce the effective student-teacher ratios. But in many low-income coun- The population-weighted national av- ratio, increasing the probability of in- tries teachers are frequently absent, a erage rate for rural India fell by 10 per- spections is 12.8 times as cost-effective striking indicator of weak governance. cent, from 26.3 percent to 23.6 percent. as hiring more teachers. Indeed, some studies show absence Students receive less teacher attention These results should not be over- rates regularly exceeding 40 percent. when teachers are absent, so even interpreted. They are correlations, and In this context the notional student- though the all-India student-teacher while panel data help remove potential teacher ratio matters less than the ratio fell to below 40 in this period, the confounders that are fixed over time, effective student-teacher ratio—the ac- effective student-teacher ratio after ac- they cannot address time-varying tual time that a teacher who is present counting for teacher absence was still unobserved changes in the villages. spends with children in the classroom. over 52. Combining the rate of absence Perhaps villages where the probabil- Thus while many discussions focus on with salary costs suggests that the an- ity of inspection increased were also hiring new teachers, policies that re- nual fiscal cost of teacher absence was those where overall governance im- duce the rate of teacher absence may a staggering 81–93 billion rupees (Rs), proved in other ways that could not be be equally efficacious—and far more around $1.4–1.6 billion a year at 2010 measured. Similarly, inspections are cost-effective. exchange rates. by nature a punitive policy, and any In a recent paper Muralidharan, What should the government do punitive policy requires that the gov- Das, Holla, and Mohpal discuss the about this? Using the panel structure ernment be granted a degree of legiti- relative trade-offs between strategies of the data, the authors compared macy. Nevertheless, the results make that augment inputs (hire more teach- and contrasted different correlates of a strong case that where governance ers) and those that decrease inefficien- teacher absence. The two headline re- is weak, strategies to reduce ineffi- cies (reduce absences) using data that sults: First, a reduction in the notional ciencies may be many times as cost- they collected from 1,297 villages in student-teacher ratio of 10 percent was effective as those that seek to augment India. The sample retained the rural associated with a 0.5 percent increase inputs. portion of earlier work in 2003, allow- in average teacher absence; perhaps ing the authors to construct a panel of if there are more teachers, it is easier villages seven years apart. to manage the school even when one First the good news. Between 2003 of them is absent. Second, improved and 2010 public primary schools im- school monitoring through inspections proved dramatically along multiple was associated with a significant de- dimensions. The share of teachers cline in absences. Increasing the prob- with a college degree increased from ability of inspection in the previous 41 percent to 58 percent, and the three months from zero to one was as- share reporting that they were being sociated with a decline in the absence regularly paid rose from 49 percent rate of 6.4–8.2 percentage points, or to 78 percent. The share of schools 27–35 percent. with toilets and electricity more than These numbers set up an illuminat- doubled (from 40 percent to 84 percent ing trade-off. Consider two policies to for toilets, and from 22 percent to 45 reduce the effective student-teacher percent for electricity); the share with ratio: hiring more teachers and hiring functioning midday meal programs more inspectors. What would their Karthik Muralidharan, Jishnu Das, Alaka Holla, and Aakash Mohpal. 2017. “The Fiscal Cost of nearly quadrupled (from 22 percent relative costs and benefits look like? Weak Governance: Evidence from Teacher Absence to 79 percent); the share with a library Hiring enough supervisors to increase in India.” Journal of Public Economics 145: rose from 51 percent to 69 percent; and the probability of a school being in- 116–35. (Also issued as Policy Research Work- almost all schools now have access to spected by 10 percentage points would ing Paper 7579, World Bank, Washington, DC, drinking water (96 percent). The Indian cost Rs 448 million a year. But the 2016.) World Bank Research Digest 5 Flies without Borders: Lessons from Chennai on Improving Municipal Public Health Services Chennai offers some lessons for Indeed, public health services are the council’s headquarters and from other Indian cities on how to especially vulnerable to such devolu- the Tamil Nadu State Public Health improve the governance of public tion, for at least two reasons. First, Directorate. their success is defined by a lack of •  A strong state public health directorate health services (adverse) events. It is far easier for whose head is empowered to monitor I elected representatives to gain credit and support the municipal council’s ndia’s fast-growing cities face three with their constituents by opening a public health services. This directorate key challenges in improving public hospital. Second, decision making for is unusual in India in its strong capac- health outcomes. The first is the public health services is highly techni- ity for public health administration, persistence of weak links in the chain— cal and needs to respond rapidly to with a clear mandate and budget. Its notably, badly underserved slums, ever-shifting disease conditions. This staff are experienced in managing pub- from which contagion can spread kind of agile decision making is diffi- lic health services. They participate in across a city. Richer residents corner cult to achieve if key decisions must be meetings at all levels of the state ad- public resources such as water and approved by nontechnical people. ministration to discuss public health sanitation services, but the health in- The third challenge is fragmentation threats, raising awareness of the com- dicators of their children suggest that of services with inadequate coordination plexities involved in generating good they are deeply affected by contagion arrangements. Public health outcomes public health outcomes. Most other from the broader urban environment. depend on the provision of multiple state public health directorates are too While access to medical care services—including water supply, weak to do this, and resources are con- ensures low mortality among these sewerage, solid waste, and drainage. centrated instead on medical services. privileged children, repeated infec- Poor drainage or uncollected garbage •  An active approach to service de- tions expose them to stunting. Indeed, can hamper mosquito control efforts. livery, especially to vulnerable populations. a quarter of children in the wealthi- Poor coordination of these services Chennai’s municipal health depart- est quintile of Indian households are threatens public health outcomes. It ment conducts regular health camps in stunted, compared with 5–8 percent also demoralizes public health staff slums. These screen slum residents for of their counterparts in Sri Lanka or and citizens seeking to improve health diseases, for the purpose of both treat- in lower-income countries in Latin conditions. ing them and collecting disease preva- America, which have better public Some cities in India have addressed lence data to inform service planning health systems. Stunting is associ- these challenges more effectively than and avert outbreaks. This outreach is ated with lower cognitive ability, lower others, as is shown in a recent paper crucial given the high externalities of earnings, and shorter life expectancy. by Das Gupta, Dasgupta, Kugananthan, communicable diseases. Unlike Delhi, The realization that poor slum sanita- Rao, Somanathan, and Tewari. The Chennai also has very high coverage of tion also affected wealthier people authors explore the management of maternal and child health services in helped motivate municipal govern- municipal public health services in two slums. ments in Western countries to improve major Indian metropolises with sharp- Chennai has lower levels of child slum conditions. As John Duffy wrote ly contrasting health and sanitation stunting than other major Indian in 1971, describing late 19th-century indicators. One is Delhi, where ser- metropolises, suggesting that its ap- slum improvements in New York City, vices are quite constrained. The other proach has gone far toward improving is Chennai, the capital of Tamil Nadu health outcomes. But it could ac- The knowledge that the diseases of the state, which mitigates these challenges complish much more if its municipal workers who sewed clothes in their filthy in several ways: health department were given the au- tenement homes or who processed food •  A considered approach to devolu- thority to ensure better environmental could be spread to decent, clean, and tion and management. Tamil Nadu state sanitation. respectable citizens served as a powerful does not transfer all control over These lessons from Chennai could incentive to the reform of public health. funds and line agency staff to lo- be applied in other Indian cities, which cal bodies. Moreover, the Chennai share the same overall administra- The second challenge is devolution of Municipal Council Act empowers the tive system. Some might argue that service delivery that transfers funds and state government to sanction errant Tamil Nadu is “different” because responsibilities to local elected bod- elected representatives. The municipal of its bureaucracy’s strong work cul- ies without strong arrangements for council’s work is overseen by elected ture. This misses the point that good holding them accountable for effective representatives but managed by pro- management practices can generate financial management or service deliv- fessional administrators and technical ery. Devolution works poorly for intan- professionals. Its field staff are helped gible and highly technical services like in maintaining professional stan- public health. dards by monitoring and support from (continued on page 12) 6 World Bank ResearchDigest Are Invisible Walls Inhibiting Internal Migration in India? India has unusually low migration paper by Kone, Liu, Mattoo, Özden, identical patterns hold for emigration across state borders. One possible and Sharma. Working with the Indian from Nagpur. reason: state-level administration of authorities, the authors obtained a In an econometric analysis based unique data set from the 2001 census on a gravity model, the authors use benefits and preferences on district-to-district migration be- the detailed bilateral migration data N tween each pair of India’s 585 districts. to control for origin- and destination- ational borders clearly limit These data were disaggregated by specific factors, such as climate, natu- international migration. But age, education, duration of stay, and ral resource endowments, and social we do not necessarily expect reason for migration, leading to a de- and economic conditions. This makes provincial or state borders to prevent tailed migration profile. it possible to focus on the bilateral people from moving within a country. Nagpur, a district in Maharashtra, variables, such as physical distance After all, most countries do not im- illustrates the restrictive effect of state and linguistic overlap, as well as the pose restrictions on internal mobility, borders on internal migration. Located critical contiguity variables—being in with the famous exception of China’s at the center of India, Nagpur is close the same state, being neighbors, or hukou system. Yet in India state bor- to three other states: Chhattisgarh, both. ders form “invisible walls,” leading Madhya Pradesh, and (until the for- Results show that migration be- Indians to display puzzling reluctance mation of Telangana in 2014) Andhra tween neighboring districts in the to cross state borders. Pradesh. Map 1 shows the color-coded same state is at least 50 percent In 2001 internal migrants made up distribution of the origin districts greater than migration between neigh- 30 percent of the Indian population, of the migrants coming to Nagpur, boring districts in different states. but this is a deceptively large number. with darker shades indicating higher Interestingly, state borders are a big- Two-thirds were migrants within dis- shares. The thin lines represent dis- ger hindrance to migration for men— tricts, and more than half were women trict borders, while the thick lines rep- especially for younger men—than for migrating for marriage. Internal migra- resent state borders. The four neigh- women. And the more educated are tion rates in the five years ending in boring districts in Maharashtra sent more reluctant to cross state lines. 2000 were nearly four times as high in 31 percent of Nagpur’s immigrants. The low level of internal mobil- Brazil and China—and more than nine In contrast, the other three neighbor- ity across state borders is a puzzle times as high in the United States. ing districts, all in Madhya Pradesh, because there are no explicit legal re- Indeed, in a comparison among 80 sent only 13 percent. More migrants strictions. The authors suggest a pos- countries based on data between 2000 came to Nagpur from other districts sible explanation: explicit and implicit and 2010, India ranked last. in Maharashtra that are hundreds of entitlement programs implemented at These internal migration pat- kilometers away than from neighbor- the state level discourage mobility. terns in India are explored in a recent ing districts in other states. Almost Many social benefits are not por- table across state boundaries, even if they are federally funded, because Map 1. Origins of In-Migrants in the District of Nagpur they are administered by the state Raisen Jabalpur Shahdol governments. For example, the public Sehore Narsimhapur distribution system for subsidized Dindori Indore Dewas Mandla food, and even admission to public Hoshangabad Korba hospitals, are administered through Harda Seoni Bilaspur “ration cards,” issued and accepted Chhindwara Kawardha West Nimar Betul Balaghat Janjgir-Ch only by the home state government. East Nimar The authors find that in states where Raipur the public distribution system offers Gondiya higher levels of coverage, unskilled Amravati Nagpur Bhandara Rajnandgaon Durg Mahasamund Jalgaon migrants are relatively less likely to Wardha Akola move out of state. These are people Buldana Dhamtari Balangir Nuapada who would realize large wage gains Washim Chandrapur Kanker Yavatmal from mobility. But they do not move from their home state for fear of losing Jalna Hingoli Gadchiroli Bastar Nabarangapur welfare benefits. Parbhani Adilabad Bid Nanded Dantewada Koraput Nizamabad Karimnagar (continued on page 12) World Bank Research Digest 7 Making It Easier to Apply for a Bank Account in India India’s financial inclusion program as likely to say that the application key part in connecting rural residents has made it easier to get a bank process was difficult. and poor adults with formal financial account. But applicants continue to Yet people who wish to apply for institutions, and trust in their integrity an account continue to incur a range is therefore critical to the success of incur a range of costs of costs, including the cost of traveling the JDY program. A to bank branches, the cost of collect- The survey also reveals opportuni- bout 2 billion adults worldwide ing documentation, and various other ties for India to build on its financial lack an account at a formal monetary costs. Most applicants face a inclusion successes. While financial financial institution. India is combination of these costs, and their inclusion begins with having an ac- home to about a fifth of them. But giv- cumulative impact may be enough to count, the benefits come only from en mounting evidence that accounts dissuade people without an account active use of the account to make pay- help enable a wide range of develop- from applying. ments, save money, and manage risk. ment goals, the government is seeking People who ended up applying The 2014 Global Financial Inclusion to improve this situation. In August faced a host of other challenges. More (Global Findex) database showed that 2014 it launched a flagship program than half of JDY applicants reported 43 percent of accounts in India were aimed at achieving universal account paying a required minimum initial de- inactive. One promising initiative cen- ownership. Known as the Jan Dhan posit, even though the program carries ters on payment banks—which can Yojana (JDY) scheme, the program has no such requirement. It’s understand- offer remittance services, mobile pay- yielded impressive results: by the end able that banks need deposits to make ments and transfers, and other bank- of 2016 about 250 million accounts accounts commercially viable. But ing services such as ATM or debit cards had been opened thanks to the new such a minimum deposit violates the (though not loans or credit cards). By policy. intent of the government’s program. allowing access to financial services Using a survey of 13,000 adults Among applicants, 70 percent cited through mobile phones, the payment across India, a new paper by Demirgüç- receiving, sending, and saving money banks offer a way to reduce travel time Kunt, Klapper, Ansar, and Jagati inves- as their main reason for applying for and transportation costs for poor and tigates the JDY program. The survey an account, while 13 percent applied rural residents. finds that women, poor people, and because they expected the govern- The survey shows the value of illiterate adults were more likely to ap- ment to hand them a cash bonus for extending the scope of questions to ply for an account after the program opening a JDY account. Some accounts include metrics of the cost, time, and was introduced. Women and poor will be used to receive future govern- documentation challenges of opening adults were 5 percentage points more ment transfer payments. But the false new accounts. This information can likely to apply for JDY accounts than expectation of free money could leave help inform policy makers, research- men and wealthier adults. And appli- many people with accounts that are ers, and practitioners working toward cation rates were 10 percentage points not used. greater and more inclusive access to higher among illiterate adults than The survey results point to several and use of formal financial services. among those who had studied beyond recommendations that could improve primary school. Overall JDY application the account application process, in- rates are negatively correlated with cluding more effectively communicat- wealth at the state level, unlike tradi- ing the requirements for opening a JDY tional application rates. This suggests account. Better marketing of the policy that the policy has disproportionately could address the concerns of the 35 helped adults in poorer states. percent of adults who said they did Drawing on additional individual- not apply for an account because the level data, the paper also explores the process is too expensive. People need costs of opening an account, the ef- to be informed that JDY accounts are ficiency of the account application pro- free and that there are no minimum cess, and demographic differences be- deposit requirements. tween those who choose to apply and While clarifying and simplifying the those who do not. The JDY program procedures for opening a JDY account aims to open one account per Indian is the first step, better governance of household by offering zero-balance bank agents and NGOs assisting with Aslı Demirgüç-Kunt, Leora Klapper, Saniya An- accounts with no opening fees. And the vast task of bringing hundreds sar, and Aditya Jagati. 2017. “Making It Easier to compared with traditional applicants, of millions of adults into the formal Apply for a Bank Account: A Study of the Indian adults who applied for a JDY account financial system is just as important. Market.” Policy Research Working Paper 8205, in the year before the survey were half These correspondent agents can play a World Bank, Washington, DC. 8 World Bank ResearchDigest Managing Food Price Volatility in India India’s food security policy has been is effectively a buy-and-hold strategy. difficult to achieve with a price-band successful in stabilizing the prices Large stocks are held for long periods, program (or its variants). of staples, though at a high cost. Are and procurement continues regard- Two main messages emerge from less of the level of stocks. But stock this analysis. First, the approach ad- there less costly alternatives? releases, beyond those by the public opted by India, combining trade and I distribution system, are insufficient storage policies, has helped achieve its ndia has pursued an active food to dampen domestic price rises or to objective of stabilizing prices. Second, security policy for many years. keep stock levels in check. Instead, the with some modifications India could This combines trade policy inter- government has occasionally had to significantly improve its total welfare ventions, public distribution of food dispose of wheat stocks on the world and reduce its costs (primarily storage staples, and assistance to farmers market. costs). Price stabilization policies are through minimum support prices de- Another key consideration is the generally not regarded as first-best fended by public stocks. The policy cost of public grain storage. The cur- policies because they do not directly has been successful in stabilizing sta- rent costs, declared by the Food target the underlying market failures, ple food prices. But stabilization has Corporation of India, are four times which are often thought to be related come at a high cost, raising concerns the long-run cost estimates for other to the economic agents’ lack of capac- about whether the costs exceed the countries, making it difficult to justify ity to cope with shocks. Yet stabiliza- benefits. Moreover, the policy risks the public storage in India on economic tion policies appeal to policy makers accumulation of unmanageably large grounds. Relying on domestic private with a strong dislike for price instabili- stocks. Indeed, in recent years stocks storage or on world trade and storage ty, and certain market failures may pre- have far exceeded the established abroad would be much less costly. For vent the first-best policies from achiev- norms for buffer stocks and strategic this reason the alternative policies ing their goals. These factors point to reserves. considered are based on providing the importance of identifying better In a recent paper Gouel, Gautam, sufficient incentives to induce more policies to achieve price stability. and Martin analyze the welfare and cost-efficient private stock holders, or The analysis suggests that given cost implications, using a rational a lower-cost public storage agency, to the current circumstances in India, a expectations storage-trade model to store grains in a socially optimal way. less insulating trade policy, combined represent India’s wheat market and its The model is used to identify the with storage rules that are similar to relations with the rest of the world. levels of storage and trade under an but above competitive storage levels, The model evaluates the current poli- optimal policy that maximizes total could lead to significant cost savings cies for managing wheat price volatility welfare. But because a fully optimal (through a combination of storage and in India and considers alternatives. policy is state-dependent and may be trade costs) with no significant net loss Representing current policies is difficult to implement, optimal simple in pure welfare (defined as the sum a challenge, however, because they rules are considered for more practi- of producer and consumer surplus). appear to be highly discretionary. To cal policy guidance. These are simple These gains are predicated on efficient capture their essence, simple rules predetermined rules whose parameters storage, however. The current public are used, defined as functions of are chosen to maximize the same wel- costs of storage are extremely high and world and domestic conditions. The fare function. Two rules considered are make it difficult to justify any level of alternative policies are derived from a constant subsidy to private storage public storage in the country without the maximization of a social welfare (as storage policy) and tariffs defined significant loss in overall welfare. function that includes a motivation for by an isoelastic function of border price stability. The study includes two price (as trade policy). innovations for developing price sta- A notable result from the model is bilization policies: It designs optimal that the optimal simple rules achieve price stabilization policies for a large welfare gains approaching those un- country. And it considers simple rules der a fully optimal policy. The stor- for stabilization and demonstrates how age subsidy provides incentives for closely their effects can approximate private storage to exceed the level in those of a fully optimal policy. the absence of intervention. The vari- India’s current policies are costly able tariff results in lower volatility of Christophe Gouel, Madhur Gautam, and Will J. Martin. 2016. “Managing Food Price Volatility for two reasons: trade and storage domestic prices, without attempting in a Large Open Country: The Case of Wheat in policies are not well coordinated, and to eliminate all volatility. Since private India.” Oxford Economic Papers 68 (3): 811– lacking clearly defined rules for stock storage responds in appropriate ways 35. https://doi.org/10.1093/oep/gpv089. (Also release (other than for the public dis- to price, it combines well with the issued as Policy Research Working Paper 7551, tribution system), the storage policy trade policy, a result that is extremely World Bank, Washington, DC, 2016.) World Bank Research Digest 9 Uncertainty and Inefficiency in South India’s Groundwater Markets Inefficiencies in South India’s forms: spot contracts, in which ground- using the observed covariation of groundwater markets may reduce water is sold on a per-irrigation basis borewell flow uncertainty with sales the likelihood that small farmers throughout the season, and long-term contract type as well as with neighbor- contracts, in which the area irrigated ing plot area irrigated. The model also adopt water-saving technologies and the price are determined before makes it possible to distinguish the I planting and guaranteed for the entire contracting distortion from the fixed ndia uses far more groundwater season. cost of arranging water transactions. than any other country, primarily In a special groundwater markets How costly are groundwater mar- for agriculture. In recent decades survey developed by the authors and ket distortions to the typical borewell private investment in borewells has covering around 2,400 borewells across owner? Using the estimated model, the surged, unleashing a wave of agricul- six districts of Andhra Pradesh and authors find that the overall cost for a tural intensification, a boon to the Telangana in 2013, farmers were asked well owner with the median plot size rural poor. But because of the extreme to assess the probability distribu- is $39, or 5.7 percent of dry-season in- fragmentation of land and the high tion of borewell flow at the end of the come. The contracting distortion alone costs of well drilling in India, many season given the typical flow at the costs $13, or 1.9 percent of dry-season farmers still gain access to dry-season beginning of the season. On this basis income. irrigation through highly localized only a handful of well owners report Importantly, however, the distortion groundwater markets. zero uncertainty, and for many the costs are highly regressive. Borewell In principle, these markets should uncertainty is substantial. Moreover, owners with the smallest plots, who allow for an efficient allocation of this uncertainty affects behavior; the also tend to be the poorest ones, face groundwater across farms—important greater it is, the more likely that a the greatest proportionate loss of because of concern about the sustain- per-irrigation contract will be chosen surplus, because they are the most ability of this vital resource. India’s over a seasonal contract. reliant on groundwater markets. Since main policy related to groundwater The intuition for this finding is smaller farmers would have a greater has been its effort to promote water- simple. Suppose that a borewell’s need to sell excess groundwater as the saving technologies (drip and sprinkler flow drops off unexpectedly late in the efficiency of irrigation improves, their irrigation), through subsidies targeted season. Under a seasonal contract the return to water-saving technology is particularly to small farmers. For these borewell owner (water seller) bears also lower. In this way the uncertainty farmers, however, the benefit of water- the cost. Since he has committed to of groundwater supply and the con- saving technology depends on their fully irrigate his buyer’s field, his own comitant distortions may reduce the ability to expand water sales to neigh- crop must suffer. By contrast, in the likelihood that smallholders adopt boring cultivators—that is, on the ef- per-irrigation arrangement buyer and water-saving technologies. ficiency of groundwater markets. Yet seller share the pain, through adjust- our understanding of these markets ment in the groundwater price and remains limited. quantity. In a recent paper Giné and Jacoby The seasonal contract has an up- focus on the groundwater economy of side, however. The buyer plants more South India. Here the hard-rock aqui- area than he would under the per-irri- fers undergo an annual cycle of replen- gation arrangement because he knows ishment during the monsoon season that, once he has committed his crop, followed by drawdown as millions he will not lose his power to bargain of borewells pump out groundwater for a good price of irrigation because for dry-season irrigation. Depending price and quantity are fixed in ad- on local conditions, borewells may vance. This commitment benefits the unexpectedly run partially or totally seller as well because it expands his dry during the growing season, leav- market. As flow uncertainty increases, ing crops vulnerable to water stress. the cost of the inflexibility inherent in Because planting involves an up-front the seasonal contract rises so that the and irreversible investment, a farmer’s per-irrigation contract is eventually standing crop can effectively become preferred. hostage to a single potential water The authors estimate an economic seller. model of irrigation decisions incor- Xavier Giné and Hanan G. Jacoby. 2016. “Mar- In this context bilateral transac- porating precisely this trade-off. The kets, Contracts, and Uncertainty in a Ground- tions between well owners and neigh- key contribution lies in quantifying water Economy.” Policy Research Working Paper boring farmers take one of two simple the groundwater market inefficiencies 7694, World Bank, Washington, DC. 10World Bank ResearchDigest Deliberative Inequality: A Text-as-Data Study of Village Assemblies in India Deliberations in village meetings information. The literature has gener- against women in a number of differ- in India are strongly influenced ally analyzed the quality and nature ent ways. Remarkably, where the vil- by gender inequality. But female of discourse in deliberative forums lage presidents are women (as a third through small-sample ethnographies of them are, through quasi-random leadership can reverse this bias or in university lab settings. This assignment), they correct for this bias E paper is one of the few to conduct a and raise the likelihood that female lectoral democracy is based on large-sample qualitative analysis of citizens will set the agenda by 20 the simple but elegant notion this topic using new machine learning percent. that tallying votes aggregates methods. To measure whether there are gen- preferences. But the limitations of The question the paper asks is der differences in the ability of citizens this mechanism as a way of governing whether there is gender equality in to draw a response from the govern- large, complex societies have become voice and deliberation. The authors ment, the authors assess the probabil- increasingly apparent throughout the analyze this question by looking at ity that a topic mentioned in citizens’ world—with challenges that include three aspects of democratic process- speech is also addressed by the village elite capture, clientelism, and indeed es—equality of participation, agenda- leadership in a subsequent speech. its very legitimacy. setting power, and the responsiveness They find that women are about 20 This has led to a revival of the very of the state. In the 50 gram sabhas percent less likely to elicit a response old idea of direct democracy—that analyzed, each “speech act”—that is, from village leaders. But once again interests of diverse citizens can be rep- each statement made by a participant the situation is reversed when the resented by a process of discussion, without interruption—counts as a president is a woman, a circumstance debate, and dialogue that builds con- “document.” The authors have 1,736 raising the probability that a female sensus. This form of deliberative de- documents identified by the speaker’s citizen is listened to by 20 percent. mocracy derives from the premise that sex and whether the speaker is a citi- Gram sabhas in Tamil Nadu are “democracy revolves around transfor- zen, a bureaucrat, or an elected official. meaningful spaces of citizen delibera- mation rather than simply the aggre- Gram sabhas in the state of Tamil tion where citizens, rather than politi- gation of preferences” (Jon Elster, ed., Nadu, where the study was conducted, cians or bureaucrats, dominate the dis- Deliberative Democracy, vol. 1 [Cambridge: have about 50 percent female at- cussion. But the deliberations within Cambridge University Press, 1998], p. tendance. But the authors find that a gram sabha are strongly influenced 1). This thinking has fundamentally im- men speak twice as often as women, by gender inequality in the prevalence portant implications for development and when they speak they do so, on of voice, in agenda-setting power, and as well because of the great interest average, about 40 percent longer. in the responsiveness of the state. in participatory development and the Interestingly, male citizens do not Quotas for women presidents reverse challenges in doing it well. speak any longer than female citizens, this bias because women presidents A recent paper by Parthasarathy, so the male domination of the dis- are more likely both to let women citi- Rao, and Palaniswamy explores these course is driven by male politicians. zens set the agenda and to respond to issues, making both a substantive To study the ability of individuals to the topics they raise. and a methodological contribution to set the agenda of the meeting, the au- the study of governance and citizen thors first measure the extent to which engagement. On the substance, the a topic mentioned in a person’s speech paper is an analysis of gender inequal- is repeated in the next speech act. ity in deliberative decision making, They then check to see whether this looking at transcripts of meetings from topic is persistent by being repeated the largest deliberative institution in in the five subsequent speech acts. human history—gram sabhas, or village They find that speeches by citizens are forums in rural India. These meetings about 9 percent more likely to be set- deal with important decisions for the ting agendas by the first measure, and village, such as selecting beneficiaries about 7 percent more likely by the sec- for public programs and allocating ond one, than speeches by politicians budgets for public goods and village or officials. In other words, speech acts development plans. by politicians and officials are decla- The paper’s methodological contri- mations while those by citizens are Ramya Parthasarathy, Vijayendra Rao, and bution is to analyze 50 transcripts of more questions or conversations. Nethra Palaniswamy. 2017. “Deliberative In- village meetings using “text as data” But male citizens are far more likely equality: A Text-as-Data Study of Tamil Nadu’s natural language processing methods to set the agenda than female citizens Village Assemblies.” Policy Research Working Pa- to analyze patterns of speech in textual are. The gram sabha is clearly biased per 8119, World Bank, Washington, DC. World Bank Research Digest11 Cultural Impediments to Cooperating: A Study of Low- and High-Caste Men in Rural India High-caste men in North India show An efficient, cooperative convention family’s honor could be the key to the a poor ability to learn to cooperate quickly emerged in most low-caste security of its wealth. But in today’s en- in an experiment—an impediment pairs, just as it had for most pairs in vironment, where there are no invaders experiments in the United States. But and formal institutions protect prop- likely to be at work in real life high-caste pairs were far less success- erty rights, a central consequence of T ful at forming conventions, and when the culture of honor may be to impede he quality of social conventions they did form one, it was much more the ability to form cooperative conven- in a society is critical to its well- likely to be inefficient. tions. If the loss from a coordination being. Conventions influence rec- The only situation after which a failure triggers a strong enough desire iprocity, work effort, respect for private large and robust difference in behavior to retaliate, that desire transforms the property, and much else. Laws are not occurred between low- and high-caste coordination game into a situation a substitute; a law that runs counter players was when a player suffered where the possibility of learning to co- to a convention rarely overturns it. The a loss from a coordination failure. operate vanishes. ability of a society to form efficient Indirect evidence, based on a survey The authors’ findings challenge the conventions is an important factor in that the authors conducted and a the- view that earlier results on convention its economic development. ory that fits the experimental results, formation by fixed pairs of subjects Consider two individuals who re- suggests that low- and high-caste from Western, educated, industrial, peatedly but anonymously interact in players had different interpretations rich, and developed (WEIRD) societ- a coordination game in which coop- of this event that led them to respond ies apply to all humans. Instead, their eration is the best response to coop- differently in the next round of the results support the view that differ- eration, but entails a risk of a small game. The low-caste men appeared to ences in cultural framing can lead two loss if the other player chooses not to perceive the loss as the innocent con- populations to perceive a coordination cooperate. Will they learn to cooper- sequence of misaligned expectations. problem very differently. ate? Earlier work with U.S. subjects led But the high-caste men appeared to The poor ability of the high caste to many economists to think so. They be- construe it as an insult to which they learn to cooperate in the experiment lieved that fixed pairs were almost sure retaliated by not taking the cooperative suggests that this impediment is likely to establish a convention for coopera- action in the next round. The apparent to be at work in real life. The state in tion after a remarkably few interac- concern for honor is not a luxury good. North India in which the studies were tions, as expectations that each would The pattern of retaliation by the high done is dominated by the high castes. take the cooperative action converged. caste holds for the subsample of men As the Nobel Laureate Amartya Sen If this were generally true, it would who live in mud houses. observes, if this state were a country, be consequential, since a convention To investigate the difference in it would be among the largest and the formed by a small group can often be caste culture, the authors presented poorest on earth. Its long history of maintained as the group gradually in- low- and high-caste men with hypo- coordination failures has stymied eco- creases in size. thetical scenarios in which one man nomic development. In a recent paper, however, Brooks, harms another. Many more high-caste Hoff, and Pandey observe that the than low-caste men said that they ability of most fixed pairs to learn to would retaliate. Low-caste men often cooperate does not apply across all said that they would try to de-escalate cultures—because they found one the conflict or that they would not where it does not. With a sample of respond at all. By a standard psycho- 122 subjects, they show that most logical test to measure self-efficacy, a high-caste men in North India do not caste gap in self-efficacy does not ex- have this ability in repeated rounds of plain the caste difference in response a coordination game that is a proto- to harms. type of the social contract. They drew The caste difference in the respons- their sample in 10 villages by visiting es are consistent with work in anthro- every third, fourth, or fifth house (de- pology and sociology that documents pending on the hamlet’s size) as they a culture of honor among the high walked through each low- or high-caste castes of North India. “Honor” entails a hamlet. reputation for responding aggressively Benjamin Brooks, Karla Hoff, and Priyanka The authors found that the low- and to perceived insults. The culture of Pandey. 2016. “Can the Culture of Honor Lead high-caste groups differed sharply in honor is a code for interpretation and to Inefficient Conventions? Experimental Evidence the ability to form conventions as well action. In the lawless environment that from India.” Policy Research Working Paper 7829, as in the kinds of conventions formed. historically prevailed in North India, a World Bank, Washington, DC. 12World Bank ResearchDigest (continued from page 6) Recent Policy Research Working Papers on India Are Invisible Walls reforms that make welfare benefits fully portable and end state-biased Inhibiting Internal recruitment for jobs and admissions 7547 A Detailed Anatomy of Factor Misallocation in India Migration in India? to educational institutions. Gilles Duranton, Ejaz Ghani, Arti Grover Goswami, and William Kerr 7623 Identifying the Economic Potential of Indian Districts While the nonportability of such Mark Roberts benefits inhibits the movement of the Zovanga L. Kone, Maggie Y. Liu, Aaditya Mat- 7741 Spatial Development and Agglomeration too, Çaglar Özden, and Siddharth Sharma. 2017. Economies in Services—Lessons from India poor and the unskilled, two other fac- Ejaz Ghani, Arti Grover Goswami, and William “Internal Borders and Migration in India.” Policy Kerr tors contribute to the inertia of the Research Working Paper 8244, World Bank, 7783 Can Labor Market Imperfections Explain skilled. Many universities and techni- Washington, DC. Changes in the Inverse Farm Size-Productivity cal institutes are administered by the Relationship? Longitudinal Evidence from Rural India state governments, and state resi- Klaus Deininger, Songqing Jin, Yanyan Liu, dents get preferential admission. In and Sudhir K. Singh 7792 Hidden Human Capital: Psychological addition, a common requirement for Empowerment and Adolescent Girls’ employment in state government enti- Aspirations in India Sanchari Roy, Matthew Morton, and ties is state domicile, usually requir- Shrayana Bhattacharya ing long periods of continuous resi- 7799 Can Environmental Policy Reduce Infant dence—and government jobs account (continued from page 5) Mortality? Evidence from the Ganga Pollution Cases for more than half the employment Quy-Toan Do, Shareen Joshi, and Samuel Stolper opportunities for people with higher education. Flies without Borders 7883 Does Input-Trade Liberalization Affect Firms’ Foreign Technology Choice? Internal mobility is critical for de- Maria Bas and Antoine Berthou 7923 Understanding India’s Urban Frontier: What velopment and poverty reduction, es- a strong work culture—including by Is behind the Emergence of Census Towns pecially for a country like India, which providing training, support, and clear in India? Partha Mukhopadhyay, Marie-Hélène Zérah, has the world’s second largest labor responsibilities and accountabilities. Gopa Samanta, and Augustin Maria market and hundreds of millions of Conversely, work cultures unravel 7996 Who Should Be at the Top of Bottom-Up Development? A Case Study of the National people living in poverty. India’s “frag- where there is a pervasive lack of ac- Rural Livelihoods Mission in Rajasthan, India mented entitlements”—welfare ben- countability and responsiveness from Shareen Joshi and Vijayendra Rao 8015 An Employment Guarantee as Risk efits and education and employment above, as is starkly evident in Delhi. Insurance? Assessing the Effects of the preferences administered at the state NREGS on Agricultural Production Decisions Esther Gehrke level—are likely to dampen the effi- 8017 Gender-Neutral Inheritance Laws, Family Monica Das Gupta, Rajib Dasgupta, P. Kuganan- cient allocation of labor. The introduc- than, Vijayendra Rao, T. V. Somanathan, and K. N. Structure, and Women’s Status in India tion of a unique national identification Sulagna Mookerjee Tewari. 2017. “Flies without Borders: Lessons from 8131 Whose Power Gets Cut? Using High- system, the Aadhar card, is likely to Chennai on Improving India’s Municipal Public Frequency Satellite Images to Measure lower but not eliminate moving costs. Health Services.” Policy Research Working Paper Power Supply Irregularity Brian Min, Zachary O’Keeffe, and Fan Zhang A bigger boost would come from 8197, World Bank, Washington, DC. 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