Displaying 22 Items

Hedonistic Altruism and Welfare Economics

August 2013, revised February 2018.

Summary. When future generations enter hedonistically into current welfare, a social planner should overweight the future relative to the individual, even if every individual has the same discount factor.

Capital and Inequality in the Long Run: Automation Without Technical Progress

(with Dilip Mookherjee), December 2017.

SummaryWe present a theory of long run inequality and automation driven by capital accumulation rather than technical progress. At the heart of the theory is a singularity condition that guarantees automation in the production of automated technologies. If that condition is satisfied, the functional share of capital approaches 100% in the long run.

Maximality in the Farsighted Stable Set

(with Rajiv Vohra), December 2017.

SummaryThe stable set of von Neumann and Morgenstern was extended to cover farsighted coalitional deviations, as proposed by Harsanyi (1974), and more recently reformulated by Ray and Vohra (2015). However,  while coalitional deviations improve on existing outcomes, coalitions might do even better by moving elsewhere. Or other coalitions might intervene to impose their favored moves. We show that every farsighted stable set satisfying some reasonable, and easily verifiable, properties is unaffected by the imposition of this stringent maximality requirement. 

Groups in Conflict: Size Matters, But Not In The Way You Think

(with Laura Mayoral), December 2017.

Summary. This paper studies costly conflict over private and public goods. Oil is an example of the former, political power an example of the latter. Groups involved in conflict are likely to be small when the prize is private, and large when the prize is public. We examine these implications empirically by constructing a global dataset at the ethnic group level and studying conflict along ethnic lines. Our theoretical predictions find significant confirmation in an empirical setting

Certified Random: A New Order for Co-Authorship

(with Arthur Robson), American Economic Review 108, 489–520 (2018).

Summary. Certified random order (a) distributes the gain from first authorship evenly over the alphabet, (b) allows either author to signal when contributions are extremely unequal, (c) will invade an environment where alphabetical order is dominant, (d) is robust to deviations, (e) may be ex-ante more efficient than alphabetical order, and (f) is no more complex than the existing alphabetical system modified by occasional reversal of name order.

Missing Unmarried Women

(with Siwan Anderson), unpublished manuscript, November 2017.

Summary. We provide systematic estimates of the excess female mortality faced by older unmarried women in developing regions. We place these estimates in the context of the missing women phenomenon. There are approximately 1.5 million missing women between the ages of 30 and 60 years old each year. We find that 35% of these missing women of adult age can be attributed to not being married. These estimates vary by region. India has the largest proportion of missing adult women who are without a husband, followed by the countries in East Africa. By contrast, China has almost no missing unmarried women. We show that 70% of missing unmarried women are of reproductive age and that it is the relatively high mortality rates of these young unmarried women (compared to their married counterparts) that drive this phenomenon.

Conflict and Development

(with Joan Esteban) Annual Reviews of Economics  9, 263-293, 2017.

Summary. In this review, we examine the links between economic development and social conflict. By economic development, we refer broadly to aggregate changes in per capita income and wealth or in the distribution of that wealth. By social conflict, we refer to within-country unrest, ranging from peaceful demonstrations, processions, and strikes to violent riots and civil war. We organize our review by critically examining three common perceptions: that conflict declines with ongoing economic growth; that conflict is principally organized along economic differences rather than similarities; and that conflict, most especially in developing countries, is driven by ethnic motives.

Backward Discounting

(with Nikhil Vellodi and Ruqu Wang), September 2017. Online Appendix.

SummaryWe study a model in which lifetime individual utility is derived from both present and past consumption streams. Each of these streams is discounted, the former forward in the usual way, the latter backward. 

Aspirations and Inequality

(with Garance Genicot) Econometrica 85, 485-519, 2017. Online Appendix2009 version.

Summary. This paper develops a theory of socially determined aspirations, and the interaction of those aspirations with growth and inequality. The interaction is bidirectional: economy-wide outcomes determine individual aspirations, which in turn determine investment incentives and social outcomes. Thus aspirations, income, and the distribution of income evolve jointly.

Kenneth Arrow

El Trimestre Económico 84. 761-769, 2017.

Summary. A translation into Spanish of my post on the event of Kenneth Arrow’s death. The original post is available here.

Information Aggregation with Heterogeneous Traders

(with Sahar Parsa), February 2017.

Summary. After the main theorem in this paper was proved, we came across Hellwig (1980), which is motivated by exactly the same considerations and proves the same result as our Theorem 2, except that our model allows for general signal structures with arbitrary covariances and asymmetries. Despite the significant additional generality, we fully appreciate Hellwig’s contribution and do not intend to publish these notes. We simply put up the results and proofs here in the hope that the approach here (which is quite distinct) will be useful to others working in the field. We intend to take these methods in other directions as well.

Information and Enforcement in Informal Credit Markets

(with Parikshit Ghosh), Economica 83, 59–90, 2016.

Summary. We study loan enforcement in informal credit markets with multiple lenders but no sharing of credit histories, and derive the dynamics of loan size and interest rates for relational lending. In the presence of a sufficient fraction of ‘natural defaulters’, the rest of the market can be incentivized against default by micro-rationing—sharper credit limits and possibly higher interest rates that serve as gateways into new borrowing relationships. When there are too few natural defaulters in the market, this can be supplemented by macro-rationing—random exclusion of some borrowers. When information collection is endogenized, multiple equilibria may arise. (Published version of unpublished notes from 2001.)

Aspirations And The Development Treadmill

Journal of Human Development and Capabilities 17, 309–323, 2016.

Summary. I describe a positive theory of socially determined aspirations, and some implications of that theory for the study of economic inequality and social conflict. The main contribution of the theory is that it attempts to describe, in the same explanatory arc, how a change in aspirations can be inspirational in some circumstances, or a source of frustration and resentment in others. These different reactions arise from the aspirational gap: the difference between socially generated aspirations and the current socio-economic standard that the individual enjoys. Ever-accelerating economic development can cut both ways in terms of inspiration and frustration.

Anatomy of a Contract Change

with Rajshri Jayaraman and Francis de Vericourt, American Economic Review 106, 316-358, 2016Online Appendix.

SummaryWe study a contract change for tea pluckers. Base wages increased while incentive piece rates were lowered or kept unchanged. Yet, in the following month, output increased by 20–80%. This response contradicts the standard model, is only partly explicable by greater supervision, and appears to be “behavioral.” But in subsequent months, the increase is comprehensively reversed. Our findings suggest that behavioral responses may be ephemeral, and should ideally be tracked over an extended period. 

Poverty and Self-Control

(with Doug Bernheim and Sevin Yeltekin), Econometrica 83 (5), 1877-1911, 2015. Online Appendix. A link to the 1999 version, which only had numerical results.

Summary. Poverty can perpetuate itself by undermining the capacity for self-control.  Our main result demonstrates that low initial assets can limit self-control, trapping people in poverty, while those with high initial assets can accumulate indefinitely.



CesIfo Economic Studies 2015.

Summary. Yes, capital must displace labor, but not because r > g. This article is based on this blog post, Branko Milanovic objected here; I replied. Piketty replies to some of his critics here.


The Farsighted Stable Set

(with Rajiv Vohra), Econometrica  83, 977–1011, 2015. Online Appendix.

SummaryWe propose a definition of farsighted stability in coalitional games, in the spirit of von Neumann-Morgenstern stability and its modification by Harsanyi. We provide a necessary and sufficient condition for the existence of a farsighted stable set containing just a single-payoff allocation. We then conduct a comprehensive analysis of the existence and structure of farsighted stable sets in simple games.

Coalition Formation

(with Rajiv Vohra),  in Handbook of Game Theory Vol 4 (H.P. Young and S. Zamir, eds), Elsevier North Holland, 2014.

Summary. This chapter surveys a sizable and growing literature on coalition formation. We refer to theories in which one or more groups of agents (“coalitions”) deliberately get together to jointly determine within-group actions, while interacting noncooperatively across groups. The chapter describes a variety of solution concepts, using an umbrella model that adopts an explicit real-time approach. Players band together, perhaps disband later and re-form in shifting alliances, all the while receiving payoffs at each date according to the coalition structure prevailing at the time. We use this model to nest two broad approaches to coalition formation, one based on cooperative game theory, the other based on noncooperative bargaining. Three themes that receive explicit emphasis are agent farsightedness, the description of equilibrium coalition structures, and the efficiency implications of the various theories.

Implications of an Economic Theory of Conflict: Hindu-Muslim Violence in India

(with Anirban Mitra), Journal of Political Economy 122, 719-765, 2014.

Summary. We model intergroup conflict driven by economic changes within groups. We show that if group incomes are low, increasing group incomes raises violence against that group and lowers violence generated by it. We then apply the model to data on Hindu-Muslim violence in India. Our main result is that an increase in per capita Muslim expenditures generates a large and significant increase in future religious conflict. An increase in Hindu expenditures has a negative or no effect. These findings speak to the origins of Hindu-Muslim violence in post-Independence India. Online Appendix.

Gender Differentials in Eye Care: Access and Treatment

(with Rajshri Jayaraman and Shing-Yi Wang), Economic and Political Weekly 49 No. 25, June 21, 2014. 

Summary. Two potential sources of gender bias in health care are (a) females access treatment later than males and (b) they receive differential care at the medical facility. We explore both of these for eye care at a large Indian medical facility.  At presentation, women have worse diagnoses than men for indicators of symptomatic illness, such as myopia and cataract. There is no difference in treatment.

Inefficiency and the Golden Rule: Phelps-Koopmans Revisited

(with Tapan Mitra), in Sugata Marjit and Meenakshi Rajeev (eds), Emerging Issues in Economic Development: A Contemporary Theoretical Perspective: Essays in Honour of Dipankar Dasgupta & Amitava Bose, Oxford University Press, 2012.

Summary. We study the celebrated Phelps-Koopmans theorem in environments with nonconvex production technologies. We argue that a robust failure of the theorem occurs in such environments. Specifically, we prove that the Phelps-Koopmans theorem must fail whenever the net output of the aggregate production function f(x), given by f(x) − x, is increasing in any region between the golden rule and the maximum sustainable capital stock.


The Age Distribution of Missing Women in India

(with Siwan Anderson), Economic & Political Weekly 47, No. 47-48, December, 2012.

Summary. Relative to developed countries, there are far fewer women than men in India. Estimates suggest that among the stock of women who could potentially be alive today, over 25 million are “missing”. Sex selection at birth and the mistreatment of young girls are widely regarded as key explanations. We provide a decomposition of missing women by age across the states. While we do not dispute the existence of severe gender bias at young ages, our computations yield some striking findings. First, the vast majority of missing women in India are of adult age. Second, there is significant variation in the distribution of missing women by age across different states. Missing girls at birth are most pervasive in some north-western states, but excess female mortality at older ages is relatively low. In contrast, some north-eastern states have the highest excess female mortality in adulthood but the lowest number of missing women at birth.