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Continued Existence of Cows Disproves Central Tenets of Capitalism?

Author

Listed:
  • Anagol, Santosh

    (University of PA)

  • Etang, Alvin

    (Yale University)

  • Karlan, Dean

    (Yale University)

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

  • Anagol, Santosh & Etang, Alvin & Karlan, Dean, 2014. "Continued Existence of Cows Disproves Central Tenets of Capitalism?," Working Papers 122, Yale University, Department of Economics.
  • Handle: RePEc:ecl:yaleco:122
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    References listed on IDEAS

    as
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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.
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    Blog mentions

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    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. Cynthia Kinnan & Shing-Yi Wang & Yongxiang Wang, 2015. "Relaxing Migration Constraints for Rural Households," NBER Working Papers 21314, National Bureau of Economic Research, Inc.
    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. 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, President and Fellows of Harvard College, vol. 132(2), pages 811-870.
    4. Dean Karlan & Robert Osei & Isaac Osei-Akoto & Christopher Udry, 2014. "Agricultural Decisions after Relaxing Credit and Risk Constraints," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(2), pages 597-652.
    5. Orazio Attanasio & Britta Augsburg, 2014. "Holy Cows or Cash Cows?," NBER Working Papers 20304, National Bureau of Economic Research, Inc.
    6. repec:hal:spmain:info:hdl:2441/4g0qd281j48jib2k4okap9f4eo is not listed on IDEAS
    7. Walker, Sarah, 2020. "Historical legacies in savings: Evidence from Romania," Journal of Comparative Economics, Elsevier, vol. 48(1), pages 76-99.
    8. Guillaume Allegre & Xavier Timbeau, 2014. "The critique of capital in the twenty first century in search of the macroeconomic foundations of inequality," Sciences Po publications 2014-10, Sciences Po.
    9. 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.
    10. 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.
    11. 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.
    12. repec:cep:stieop:58 is not listed on IDEAS
    13. Gehrke, Esther & Grimm, Michael, 2014. "Do Cows Have Negative Returns? The Evidence Revisited," IZA Discussion Papers 8525, Institute of Labor Economics (IZA).

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    More about this item

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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