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Continued Existence of Cows Disproves Central Tenets of Capitalism?

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  • Karlan, Dean
  • Anagol, Santosh
  • Etang, Alvin

Abstract

We examine the returns from owning cows and buffaloes in rural India. We estimate that when valuing labor at market wages, households earn large, negative average returns from holding cows and buffaloes, at negative 64% and negative 39% respectively. This puzzle is mostly explained if we value the household?s own labor at zero (a stark assumption), in which case estimated average returns for cows is negative 6% and positive 13% for buffaloes. Why do households continue to invest in livestock if economic returns are negative, or are these estimates wrong? We discuss potential explanations, including labor market failures, for why livestock investments may persist.

Suggested Citation

  • Karlan, Dean & Anagol, Santosh & Etang, Alvin, 2013. "Continued Existence of Cows Disproves Central Tenets of Capitalism?," CEPR Discussion Papers 9639, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:9639
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    1. de Mel, Suresh & McKenzie, David J. & Woodruff, Christopher, 2009. "Measuring microenterprise profits: Must we ask how the sausage is made?," Journal of Development Economics, Elsevier, vol. 88(1), pages 19-31, January.
    2. Dean Karlan, Ryan Knight, and Christopher Udry, 2012. "Hoping to Win, Expected to Lose: Theory and Lessons on Microenterprise Development," Working Papers 312, Center for Global Development.
    3. John Y. Campbell & Tarun Ramadorai & Benjamin Ranish, 2012. "How Do Regulators Influence Mortgage Risk: Evidence from an Emerging Market," NBER Working Papers 18394, National Bureau of Economic Research, Inc.
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    5. Pascaline Dupas & Jonathan Robinson, 2013. "Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya," American Economic Journal: Applied Economics, American Economic Association, vol. 5(1), pages 163-192, January.
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    7. Fafchamps, Marcel & McKenzie, David & Quinn, Simon & Woodruff, Christopher, 2014. "Microenterprise growth and the flypaper effect: Evidence from a randomized experiment in Ghana," Journal of Development Economics, Elsevier, vol. 106(C), pages 211-226.
    8. Kristin Mammen & Christina Paxson, 2000. "Women's Work and Economic Development," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 141-164, Fall.
    9. Garrett, Thomas A. & Sobel, Russell S., 1999. "Gamblers favor skewness, not risk: Further evidence from United States' lottery games," Economics Letters, Elsevier, vol. 63(1), pages 85-90, April.
    10. Mellow, Wesley & Sider, Hal, 1983. "Accuracy of Response in Labor Market Surveys: Evidence and Implications," Journal of Labor Economics, University of Chicago Press, vol. 1(4), pages 331-344, October.
    11. Duncan, Greg J & Hill, Daniel H, 1985. "An Investigation of the Extent and Consequences of Measurement Error in Labor-Economic Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 508-532, October.
    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Why invest in cows if their return is negative?
      by Economic Logician in Economic Logic on 2013-10-21 20:21:00

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    Cited by:

    1. Dean Karlan, Ryan Knight, and Christopher Udry, 2012. "Hoping to Win, Expected to Lose: Theory and Lessons on Microenterprise Development," Working Papers 312, Center for Global Development.
    2. Orazio Attanasio & Britta Augsburg, 2014. "Holy Cows or Cash Cows?," NBER Working Papers 20304, National Bureau of Economic Research, Inc.
    3. Cynthia Kinnan & Shing-Yi Wang & Yongxiang Wang, 2015. "Relaxing Migration Constraints for Rural Households," Working Papers id:7047, eSocialSciences.
    4. Walker, Sarah, 2020. "Historical legacies in savings: Evidence from Romania," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 76-99.
    5. Laureti, Carolina & Szafarz, Ariane, 2023. "Banking regulation and costless commitment contracts for time-inconsistent agents," Economic Modelling, Elsevier, vol. 129(C).
    6. Hasanain, Syed Ali & Khan, Muhammad Yasir & Rezaee, Arman, 2023. "No bulls: Experimental evidence on the impact of veterinarian ratings in Pakistan," Journal of Development Economics, Elsevier, vol. 161(C).
    7. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, Oxford University Press, vol. 129(2), pages 597-652.
    8. Karlan, Dean & Osman, Adam & Zinman, Jonathan, 2016. "Follow the money not the cash: Comparing methods for identifying consumption and investment responses to a liquidity shock," Journal of Development Economics, Elsevier, vol. 121(C), pages 11-23.
    9. Ojo, Kehinde Elizabeth & VanSickle, John J. & Thapa, Bhawna, 2022. "Nepal's Sacred Cattle: Profitability Analysis and Policy Implications," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 19(1), June.
    10. Guillaume Allègre & Xavier Timbeau, 2014. "The critique of capital in the twenty first century : in search of the macroeconomic foundations of inequality," Documents de Travail de l'OFCE 2014-10, Observatoire Francais des Conjonctures Economiques (OFCE).
    11. Kate Ambler & Alan de Brauw & Susan Godlonton, 0. "Cash Transfers and Management Advice for Agriculture: Evidence from Senegal," The World Bank Economic Review, World Bank Group, vol. 34(3), pages 597-617.
    12. Esther Gehrke & Michael Grimm, 2018. "Do Cows Have Negative Returns? The Evidence Revisited," Economic Development and Cultural Change, University of Chicago Press, vol. 66(4), pages 673-707.
    13. Oriana Bandiera & Robin Burgess & Narayan Das & Selim Gulesci & Imran Rasul & Munshi Sulaiman, 2017. "Labor Markets and Poverty in Village Economies," The Quarterly Journal of Economics, Oxford University Press, vol. 132(2), pages 811-870.
    14. repec:hal:spmain:info:hdl:2441/4g0qd281j48jib2k4okap9f4eo is not listed on IDEAS
    15. Macchiavello, Rocco & Casaburi, Lorenzo, 2015. "Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry," CEPR Discussion Papers 10952, C.E.P.R. Discussion Papers.
    16. Ojo, Kehinde Elizabeth & VanSickle, John J. & Thapa, Bhawna, 2022. "Nepal’s Sacred Cattle: Profitability Analysis and Policy Implications," Asian Journal of Agriculture and Development, Southeast Asian Regional Center for Graduate Study and Research in Agriculture (SEARCA), vol. 19(1), June.
    17. Argent, Jonathan & Augsburg, Britta & Rasul, Imran, 2014. "Livestock asset transfers with and without training: Evidence from Rwanda," Journal of Economic Behavior & Organization, Elsevier, vol. 108(C), pages 19-39.
    18. Anagol, Santosh, 2017. "Adverse selection in asset markets: Theory and evidence from the Indian market for cows," Journal of Development Economics, Elsevier, vol. 129(C), pages 58-72.
    19. repec:cep:stieop:58 is not listed on IDEAS

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    More about this item

    Keywords

    investment; Labor markets; Livestock; Profits; Savings;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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