Working Paper: NBER ID: w14850
Authors: Kaivan Munshi; Mark Rosenzweig
Abstract: This paper examines the hypothesis that the persistence of low spatial and marital mobility in rural India, despite increased growth rates and rising inequality in recent years, is due to the existence of sub-caste networks that provide mutual insurance to their members. Unique panel data providing information on income, assets, gifts, loans, consumption, marriage, and migration are used to link caste networks to household and aggregate mobility. Our key finding, consistent with the hypothesis that local risk-sharing networks restrict mobility, is that among households with the same (permanent) income, those in higher-income caste networks are more likely to participate in caste-based insurance arrangements and are less likely to both out-marry and out-migrate. At the aggregate level, the networks appear to have coped successfully with the rising inequality within sub-castes that accompanied the Green Revolution. The results suggest that caste networks will continue to smooth consumption in rural India for the foreseeable future, as they have for centuries, unless alternative consumption-smoothing mechanisms of comparable quality become available.
Keywords: mobility; social insurance; caste networks; inequality; economic growth
JEL Codes: J12; J61; O11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Caste network participation (Z13) | Decrease in mobility (J62) |
| Decreased mobility (J62) | Prioritization of network participation (D85) |
| Increased inequality (F61) | Greater propensity to exit insurance arrangement (G52) |
| Increase in jati income (D31) | Increase in participation in caste network (Z13) |
| Increase in participation in caste network (Z13) | Decrease in outmarriage and outmigration (J12) |
| Increase in jati income (D31) | Decrease in outmarriage and outmigration (J12) |