Essays in development economics

Chapter 1 looks at the empirical estimation of the welfare impacts of bargaining. Bargaining for retail goods is common in developing countries, but rare in the developed world. The welfare implications of this difference are theoretically ambiguous-if bargaining is a low cost form of price discrimination, it may lead to greater trade and welfare and even approximate the optimal incentive compatible outcome. However, if bargaining imposes large utility costs on the participants, then a fixed price may be preferable. I develop the tools to resolve this question, specifying a model of repeated trade with asymmetric information adapted to the context of bargaining, and developing a dynamic structural estimation technique to infer the structural parameters of the market. I then apply these techniques to the market for local autorickshaw transportation in Jaipur, India, using data I collected over 2008-2009. Chapter 2 carries out the first comparison of production function parameters estimated by structural techniques with those estimated via randomized instrumental variables using a unique dataset and field experiment performed by De Mel, McKenzie, and Woodruff (2008). In the context of a simple model of a household firm, I discuss the coefficients that each approach estimates, and the assumptions necessary to interpret those coefficients as the structural parameters of the model. I find that the values of structural and experimental estimators that most plausibly estimate the same parameters are indeed statistically and economically similar, suggesting that in some contexts structural models of production functions may be effective in recovering the parameters of production functions in the context of developing markets. These parameters may then be used to address questions relating to firm productivity and capital allocation that are both central to the study of firms in development, and potentially difficult to identify using randomized variation alone. Chapter 3 documents an attempt to overcome the challenges of police reform in the Indian state of Rajasthan, evaluated through a series of RCT (Randomized Control Trials). Four reform interventions were implemented in a randomly selected group of 162 police stations across 11 districts of the state: (1) weekly duty rosters with a guaranteed rotating day off per week; (2) a freeze on transfers of police staff; (3) in-service training to update skills; and (4) placing community observers in police stations. To evaluate these reforms, data was collected through two rounds of surveys (before and after the intervention) including police interviews, decoy visits to police stations, and a large scale crime survey-the first of its kind in India. The results suggest that two of the interventions, the freeze on transfers and the training, do have the potential to improve the police effectiveness and public image. The other reforms showed no robust effects, an outcome that may be due to their incomplete implementation. Thesis Supervisor: Abhijit Banerjee Title: Ford International Professor of Economics Thesis Supervisor: Esther Duflo Title: Abdul Latif Jameel Professor of Poverty Alleviation and Development Economics Thesis Supervisor: Robert Townsend Title: Elizabeth & James Killian Professor of Economics