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GAURI KARTINI SHASTRY
Job Market Paper
- Human Capital Response to Globalization: Education and Information Technology in India
Abstract: Recent studies have shown that trade liberalization increases skilled wage premiums in developing countries. This result suggests globalization may benefit elite skilled workers relatively more than poor unskilled workers, increasing inequality. This effect may be mitigated, however, if human capital investment responds to new global opportunities. A key question is whether a country with a more elastic human capital supply is better positioned to benefit from globalization. I study how the impact of globalization varies across Indian districts with different costs of skill acquisition. I focus on the cost of learning English, a relevant qualification for high-skilled export jobs. Linguistic diversity in India compels individuals to learn either English or Hindi as a lingua franca. Some districts have lower relative costs of learning English due to linguistic predispositions and psychic costs associated with past nationalistic pressure to adopt Hindi. I demonstrate that districts with a more elastic supply of English skills benefited more from globalization: they experienced greater growth in both information technology jobs and school enrollment. Consistent with this human capital response, they experienced smaller increases in skilled wage premiums.
Published Papers
Working Papers
- Identifying Agent Discretion: Exaggerating Student Attendance in Response to a Conditional School Nutrition Program
(with Leigh Linden)
Abstract: Many educational incentive programs rely on local agents to allocate cash or in-kind payments. These agents usually have significant discretion that can reshape the incentives envisaged by the program’s designers. Unfortunately, identifying the degree of discretion exercised by local agents is empirically difficult. We compare official attendance records and independently taken records from a school district in Mumbai, India, that distributes dry grain every month a child’s attendance exceeds 80%. This program, meant to improve nutrition and school attendance, creates incentives for teachers to inflate attendance to ensure a student receives the grain. Using dynamic programming tools and reduced form tests, we find that teachers do exaggerate attendance and that the degree to which they exaggerate depends on the characteristics of the students, specifically by inflating more the attendance of girls, children with higher test scores and students from lower caste families, but less for Islamic students.
- If You Are So Smart, Why Aren't You Rich? The Effects of Education, Financial Literacy and Cognitive Ability on Financial Market Participation
(with Shawn Cole)
Abstract: What determines whether an individual participates in financial markets? In particular, are those with more education, greater exposure to financial topics or higher cognitive ability more likely to invest in financial instruments? This is a difficult question to answer, as each of these three factors is closely correlated with a host of other individual characteristics, such as parental income and ability, which may independently affect investment decisions. We use instrumental variables and panel regression techniques to overcome this identification challenge. To study the effect of general education, we make use of changes in compulsory education laws, which induce exogenous variation in schooling. To study financial literacy education in schools, we use cohort analysis and state laws mandating such education. Finally, we study cognitive ability by focusing on sibling pairs that grew up in the same household, therefore controlling for unobserved family characteristics. We find that greater cognitive ability and educational attainment lead to significant increases in financial market participation. However, and in contrast to previous findings, we find no evidence that high school financial literacy education affects savings or investment decisions.
- Specialization and Neighborhood Effects in IT Outsourcing Firms in India
(with Kalina Manova)
Abstract: We examine how firm productivity, product and client specialization, and neighborhood spillovers shape firms’ exporting decisions in the information technology (IT) industry. We study a new firm-level dataset on IT outsourcing firms in India and present three main findings. First, while almost all firms export, more productive firms have larger sales and export greater volumes to a larger number of destination markets. Second, more productive firms offer a smaller range of services and cater to fewer client industries. Moreover, product and client specialization are associated with higher export revenues independently of the direct effect of productivity. Finally, we find strong evidence of neighborhood effects in exporting. Firms are more likely to export to a given country the greater the number of other outsourcing firms in the same city, who also sell to that market. This effect is more pronounced in the products and client industries specific to the firm, and is not attributable to the attractiveness of the destination market or to characteristics specific to the location of the firm. These results speak strongly to the presence of information or labor market spillovers in trade in services.
- The Economic Burden of Anemia
Draft available by request (current draft November 2004)
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