ESSAYS IN DEVELOPMENT ECONOMICS

Abstract

Institutions that foster human and social capital are central to the process of economic development.In particular, institutional processes can shape how individuals and communities interact, learn, share knowledge, and participate in civic and economic life. Beyond markets, these social and organizational structures, rules, norms can shape inclusion and opportunity (e.g., North, 1990).

This dissertation examines how institutions contribute to development in South Asia, focusingon programs that expand opportunities for disadvantaged populations and skill formation in young people. Specifically, it investigates the mechanisms through which community driven development programs—such as women’s self-help groups (SHGs) and youth soft skills training— shape learning, cooperation, political participation, and labor market outcomes. Across three chapters, the dissertation explores the ways in which institutional design can (i) be both inclusive of marginalized groups and enable cooperation across ethnic groups to improve access to finance and labor market outcomes (ii) strengthen political entry for marginalized groups, and (iii) facilitate smoother labor market transitions from tertiary education among youth. Collectively, these studies highlight that well designed institutions can have impacts as varied as transforming inclusion and diversity into increased rural employment and political participation as well as easing the transition of youths into the labor market.

Chapter 1 examines how inclusion and diversity within local, community driven institutionsinfluences cooperation across ethnic groups. Ethnic diversity is often viewed as an obstacle to collective action and development. Yet, development programs must often operate across social boundaries such as caste in India. Using administrative data from the state-run women’s SHG program in Bihar, India, I study how ethnic diversity—measured by the representation of marginalized Scheduled Caste (SC) women—in sub-village-level networks affects financial and livelihood outcomes. Using the plausibly exogenous order of formation of SHGs in a village and program rules for federation, I show causal evidence that greater representation of marginalized members enhances cooperation within these networks. Specifically, SHG federations (known as Village Organizations, or VOs) with more SC members are more likely to access additional loans and participate in livelihood programs such as producer groups. The study suggests that strong economic incentives in public programs can help overcome traditional social boundaries that often inhibit interaction. Additional results show that better program implementation and policies that encourage prior exposure to marginalized members in the village can amplify cooperative outcomes.

Chapter 2 investigates whether the same institution (i.e., women’s SHGs) can serve as pathwaysfor political entry among members from historically disadvantaged groups. Specifically, the study combines experimental and quasi-experimental variation to examine whether the formation of SHGs spurs candidacy in local government elections among Scheduled Castes or SCs. First, using a randomized rollout of SHGs across villages the analysis shows that SHGs substantially increase the number of SC and SC women candidates contesting local elections. These effects are particularly pronounced in villages where the seat is also reserved for SC candidates. In such villages, a more diverse pool of candidates run for local elections, including candidates from poorer households and smaller sub-castes. The study identifies two key mechanisms: increased voter mobilization and leadership experience gained within SHGs. A second research design exploiting differing timing of SHG formation across all of Bihar’s villages and the rule for reserving villages for SCs provides external validity and suggests entry effects increase with length of exposure to SHGs. The study highlights the overall complementarity of both formal (reservations) and more informal institutions (SHGs) in democratizing political entry. The chapter is co-authored with Dr. Sharan.

Chapter 3 shifts focus to institutions that enable human capital development - specificallysoft skill formation - and examines how such training programs can facilitate the school-to-work transition for young people. The key issue is the following mismatch in the labor market; soft skills are hard to train and test on for colleges. However, there is consistently high employer demand for these skills. To fill this gap, a non-profit institution trains students close to graduation on a one-month long intensive program. A total of 15 training sessions were conducted over a year by the non-profit. The program trained on both inter-personal(negotiation, expressiveness, influence, and listening) and intra-personal (self-awareness, self-control, decision making, and perseverance) soft skills. Student applicants to each training session were randomly assigned into treatment and control groups to estimate causal impacts of the program. Results show that treated students are significantly more likely to find employment soon after the training. While these effects are still higher a year later, they are not distinguishable from the control group. The main mechanism is a strong and sustained improvement in both inter-personal and intra-personal skills. The study demonstrates that soft skills are malleable in young adulthood and can assist youth in making the (often) difficult transition into the labor market. The study also calculates costs to implement the program and shows that the training is both cost-effective and scalable. The chapter is co-authored with Dr. Mahreen Khan.

Taken together, the three chapters contribute to our understanding of how institutions shapeboth social cooperation and human capital accumulation. Chapters 1 and 2 provide direct evidence of organizational features from the SHG program in India— whether it be a focus on inclusion, or through rules that enable the mixing of groups across social boundaries or through leadership roles— can generate better participation in economic and political activities. Chapter 3 complements this perspective by highlighting how a structured, low-cost training institution can enhance the employability of youth in the labor market.