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Fertility and rural labor market inefficiencies: Evidence from India

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  • Bharadwaj, Prashant

Abstract

Informational frictions are an important source of inefficiency in rural labor markets. I examine the role of family size in mitigating costs that arise due to these frictions. I show that an increase in family size decreases the demand for hired labor in tasks for which worker output and effort are difficult to observe (monitoring intensive tasks). In contrast, in tasks for which worker output is easily observed, I find no relationship between family size and hired labor use. I provide evidence that supervision costs drive the preference for family labor in monitoring intensive tasks. As a consequence, larger families spend less time in supervision. I develop a theoretical framework, that illustrates the empirical challenge of identifying the link between family size and labor demand: factors that determine labor demand on the farm also determine family size. To address this endogeneity problem, I use exogenous variation in fertility induced by both a family planning policy in India, which provides cash incentives for sterilization take up, and income shocks. I show that while neither incentive payments nor income shocks by themselves are valid instruments for completed fertility, their interaction is a valid instrument. I infer that population control policies must take into account market inefficiencies that make larger families profitable.

Suggested Citation

  • Bharadwaj, Prashant, 2015. "Fertility and rural labor market inefficiencies: Evidence from India," Journal of Development Economics, Elsevier, vol. 115(C), pages 217-232.
  • Handle: RePEc:eee:deveco:v:115:y:2015:i:c:p:217-232
    DOI: 10.1016/j.jdeveco.2014.07.001
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    1. Klaus Deininger & Songqing Jin & Yanyan Liu & Sudhir K Singh, 2016. "Can Labor Market Imperfections Explain Changes in the Inverse Farm Size–Productivity Relationship? Longitudinal Evidence from Rural India," Working Papers id:10987, eSocialSciences.
    2. Klaus Deininger & Songqing Jin & Yanyan Liu & Sudhir K. Singh, 2018. "Can Labor-Market Imperfections Explain Changes in the Inverse Farm Size–Productivity Relationship? Longitudinal Evidence from Rural India," Land Economics, University of Wisconsin Press, vol. 94(2), pages 239-258.
    3. Heath, Rachel, 2017. "Fertility at work: Children and women's labor market outcomes in urban Ghana," Journal of Development Economics, Elsevier, vol. 126(C), pages 190-214.
    4. Maëlys de La Rupelle & Christelle Dumas, 2017. "Health consequences of sterilizations," WIDER Working Paper Series wp-2017-125, World Institute for Development Economic Research (UNU-WIDER).
    5. Cai, Shu, 2020. "Migration under liquidity constraints: Evidence from randomized credit access in China," Journal of Development Economics, Elsevier, vol. 142(C).
    6. Nordman, Christophe Jalil & Sharma, Smriti & Sunder, Naveen, 2020. "Here Comes the Rain Again: Productivity Shocks, Educational Investments and Child Work," IZA Discussion Papers 13405, Institute of Labor Economics (IZA).
    7. Samuel Bazzi, 2017. "Wealth Heterogeneity and the Income Elasticity of Migration," American Economic Journal: Applied Economics, American Economic Association, vol. 9(2), pages 219-255, April.
    8. Galdo, Jose C. & Dammert, Ana C. & Abebaw, Degnet, 2020. "Gender Bias in Agricultural Child Labor: Evidence from Survey Design Experiments," IZA Discussion Papers 13826, Institute of Labor Economics (IZA).
    9. Maëlys de La Rupelle & Christelle Dumas, 2017. "Health consequences of sterilizations," WIDER Working Paper Series 125, World Institute for Development Economic Research (UNU-WIDER).
    10. IFPRI International Food Policy Research Institute, 2016. "Can Labour Market Imperfections Explain Changes in the Inverse Farm Size-Productivity Relationship?: Longitudinal Evidence from Rural India," Working Papers id:11007, eSocialSciences.

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