Theses Doctoral

Essays in Public Economics and Development

Lal, Parijat

This dissertation is motivated by the study of economic development and inequality within and across nations. Spanning topics in labor and public economics, this collection of papers speaks to two overarching themes: (i) how the distribution of power affects economic outcomes, and (ii) how governments can mobilize resources and spend them effectively.

In Chapter 1, I study how the allocation of ownership and control rights within firms affect responses to economic shocks. To shed light on this issue, I study the heterogeneous effects of a pro-competitive reform on cooperative manufacturing firms and their non-cooperative counterparts in India. The reform removed firm-size restrictions on the production of “reserved” items, increasing competition for incumbents in “de-reserved” product markets. Using a difference-in-differences approach, I find that supplier cooperatives (SCs), owned and controlled by producer-members who supply material inputs, are resilient to the shock in terms of total revenue and move away from the production of de-reserved items. SCs increase their share of income spent on materials relative to similarly sized non-cooperatives in the same industry and location, with some evidence of downward adjustments in labor spending. These cooperatives are able to withstand competitive pressure from entrants while broadly catering to the interests of their membership. On the other hand, worker cooperatives (WCs), owned and controlled by worker-members employed at the firm, face a sharp decline in revenue due to de-reservation, unlike their non-cooperative counterparts. A potential channel behind these results is that WCs are less likely to respond by picking up items that are not directly affected by the reform. Spending on labor does not fall as much as revenue for WCs, which is in line with the immediate interests of membership, but adjustments to labor inputs vary sigificantly across employment categories.

In the following chapter, my co-author, Utkarsh Kumar, and I study the equilibrium effects of subsidizing public services in the presence of vertically differentiated public and private suppliers. We evaluate one of India’s largest welfare schemes, Janani Suraksha Yojana (JSY), which subsidized childbirth at public health institutions. JSY did not improve health outcomes despite a substantial increase in take-up of institutional care. We document three equilibrium responses that explain this policy failure. First, JSY led to a mismatch in patient risk across health facilities. High-risk mothers sorted out of the highest-quality care at private facilities and into lower-quality public facilities. Second, in response to congestion and deterioration of care at public hospitals, only mothers with high socio-economic status sorted out of congested public facilities into more expensive private facilities. Third, private hospitals increased prices without improvements in healthcare quality in a specific subset of states, further crowding out high-risk and poor mothers. These findings point to the need for complementary public policies in addition to JSY.

In Chapter 3, I, along with my co-authors, Alexander Klemm and Li Liu, explore the increasingly prominent position of services in international trade and their potential to facilitate tax-driven reporting and reallocation of economic activity. Given their potential in countering this form of base erosion, withholding taxes (WHTs) on payments for services have featured extensively in ongoing reforms of the international tax architecture. The rationale behind WHTs is to preserve some taxation rights in the source country given their straightforward application, which is particularly important for low-income countries in the absence of more effective rules. We build a simple model of reporting decisions when firms have economic activities in one country and affiliates in others. We then test the predictions of this model using newly compiled data on treaty and non-treaty rates for 120+ countries over 2009-2021. Our findings indicate that while there is no significant relationship between WHTs and services trade in general, these taxes do have a strong negative impact on services imports from known low-tax jurisdictions, when base erosion is a particular concern.

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More About This Work

Academic Units
Economics
Thesis Advisors
Best, Michael Carlos
Degree
Ph.D., Columbia University
Published Here
April 24, 2024