Essays in development economics

Abstract

My dissertation chapters study the impact of environmental factors on outcomes of human functioning. The first chapter studies the impact of heat stress during a primary school leaving exam in Indonesia on outcomes in later life. The Ebtanas are a national standardized test that students must take to gain entry to secondary school. Using individual-level data on test scores, I first show that cognitive performance during the test is affected by heat stress. Impacts are heterogeneous across different subjects, with math and science being the most heavily impacted. Next, I show that disruptive weather conditions during the Ebtanas have compounding negative effects on a wide range of long-term achievements such as adult educational attainment, labor market participation and entry to the marriage market. A 1C increase in temperature in the month of exam leads to 1.53% fewer years of education, 2% fewer hours worked and a 2% higher probability of being married by 18 for women. These findings stress that even examinations conducted during early or mid adolescence may have impacts that persist through adulthood.

The second chapter studies the repercussions of an agricultural productivity shock for labor market outcomes and inequality in India. I show that the increase in productivity had heterogeneous impacts on technological diffusion and local labor market outcomes. In wheat growing areas, the productivity increase was followed by investments in labor-saving technology, demonstrated by an increase in the use of tractors. Rice areas in contrast, invested more heavily in labor-enhancing technology such as fertilizers, creating new opportunities for application of labor. These shifts exacerbated inequality in wheat districts while reducing inequality in rice districts. I show that these results are robust to fixed effects and instrumental variables strategy. These findings demonstrate that driven by differences in environmental factor endowments, a productivity shock can have heterogeneous impacts on agricultural labor markets and inequality.

Chapter 3 examines the efficacy of genealogically constructed networks in sharing risk under aggregate versus idiosyncratic income shocks in the context of geographically split-off families in Indonesia. While informal transfers are effective in sharing aggregate risks, they are ineffective in an idiosyncratic shock. Plausible reasons include a higher probability of repayment as well as greater economies of scale from resource pooling. We show that idiosyncratic shocks induce households to make long-term and costly changes to their household structure. We demonstrate this in the formation of new split-off families over time who reside outside the district. Our findings further reveal that controlling for shocks to members in a family network is an important source of omitted variable bias in empirical estimations of the impact of shocks on informal transfers.