Working Paper: NBER ID: w19437
Authors: Santosh Anagol; Alvin Etang; Dean 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: livestock; economic returns; rural India; household finance; poverty alleviation
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 |
|---|---|
| Valuation of labor (J17) | Perceived returns from livestock investment (Q14) |
| Labor market failures (J48) | Investment in livestock despite low economic returns (Q14) |
| Preference for home-produced milk (L66) | Investment in livestock despite low economic returns (Q14) |
| Opportunity cost of labor (J39) | Economic analysis of livestock (Q10) |
| Positive skewness in returns (C46) | Overall assessment of livestock profitability (Q10) |