Working Paper: CEPR ID: DP9639
Authors: Santosh Anagol; Alvin Etang; Dean S. Karlan
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.
Keywords: investment; labor markets; livestock; profits; savings
JEL Codes: E21; M4; O12; Q1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Labor market conditions (J29) | Livestock investments (Q14) |
| Household labor valued at market wages (D13) | Economic returns from holding cows (Q15) |
| Household labor valued at zero (D13) | Economic returns from holding cows (Q15) |
| Household labor valued at market wages (D13) | Economic returns from holding buffaloes (Q33) |
| Household labor valued at zero (D13) | Economic returns from holding buffaloes (Q33) |
| Livestock investments (Q14) | Economic returns (I26) |
| Labor market failures (J48) | Livestock investments (Q14) |
| Households prefer home-produced milk (D19) | Livestock investments (Q14) |