Pande, Rohini, Robin Burgess, and Grace Wong. 2005. “Banking for the Poor: Evidence from India.” Journal of European Economic Association 3 (2-3): 268-278.Abstract

State led credit and savings programs have been implemented in numerous low income countries, but their success in reaching the poor remains widely debated. We report on research which exploits the policy features of the Indian social banking program to provide evidence on this issue. State-led branch expansion into rural unbanked locations reduced poverty across Indian states. In addition, the enforcement of directed bank lending requirements was associated with increased bank borrowing among the poor, in particular low caste and tribal groups.

Pande, Rohini. 2005. “Can Rural Banks Reduce Poverty? Evidencefrom the Indian Social Banking Experiment.” American Economic Review, June 2005 95 (3): 780-795.Abstract
We exploit the introduction and removal of a nation-wide bank branch licensing rule which sought to increase and equalize bank branch presence across Indian states to estimate the effect of rural bank openings on poverty. Between 1977 and 1990, to qualify for a license to open a branch in a census location which already had one or more bank branches an Indian bank had to open four branches in locations with no bank branches.This policy caused banks to open relatively more rural branches in Indian states with lower initial Önancial development between 1977 and 1990. The reverse was true outside this period. We use these policy-induced trend reversals in the relationship between a state's initial financial development and rural branch expansion as instruments for rural branch expansion and find that rural branch expansion in India significantly reduced rural poverty.
Pande, Rohini, and Christopher Udry. 2005. “Institutions and Development: A View from Below.” Proceedings of the 9th World Congress of the Econometric Society.Abstract

In this paper we argue the case for greater exploitation of synergies between research on specific institutions based on micro-data and the big questions posed by the institutions and growth literature. To date, the macroeconomic literature on institutions and growth has largely relied on cross-country regression evidence. This has provided compelling evidence for a causal link between a cluster of `good' institutions and more rapid long run growth. However, an inability to disentangle the effects of specific institutional channels on growth or to understand the impact of institutional change on growth will limit further progress using a cross-country empirical strategy. We suggest two research programs based on micro-data that have significant potential. The first uses policy-induced variation in specific institutions within countries to understand how these institutions influence economic activity. The second exploits the fact that the incentives provided by a given institutional context often vary with individuals' economic and political status. This can help us better understand how institutional change arises in response to changing economic and demographic pressures.

Pande, Rohini, Lena Edlund, and Laila Haider. 2005. “Unmarried Parenthood and RedistributivePolitics.” Journal of European Economic Association, March 2005 3 (1): 95-119.Abstract

Political survey data for nine West European countries show that women have become increasingly left-wing compared to men, and that this trend is positively correlated with the rise of non-marriage in these countries.This pattern is mirrored in German longitudinal data (GSOEP), where transitions out of marriage make women, but not men, significantly more left-leaning. Analysis of public spending data for high-income OECD countries (1980-1998) suggests that the political impact of non-marriage extends to the allocation of State resources with increases in non-marriage first reducing and then increasing State redistribution towards children.

2005. “Measuring Empowerment at the Community Level: An Economist’s Perspective.” Measuring Empowerment: Cross-Disciplinary Perspectives, 2005.Abstract

Experiences over the past few decades suggest a shortcoming of top-down approaches to development. Since the 1980s, the new watchwords have been “participatory” or “community-led” development and, more recently, “empowerment.” The World Bank’s Empowerment and Poverty Reduction: A Source book defines empowerment as “the expansion of assets and capabilities of poor people to participate in, negotiate with, influence, control, and hold accountable institutions that affect their lives”. Before empowerment can be integrated into development policy, however, it must be clearly conceptualized, and reliable measures must be developed. This is particularly important given that such measures of empowerment are likely to become project goals for development agencies.

Khwaja, Asim, and Atif Mian. 2005. “Unchecked Intermediaries: Price Manipulation in an Emerging Stock Market.” Journal of Financial Economics 78 (2005): 203-241. Publisher's VersionAbstract

How costly is the poor governance of market intermediaries? Using unique trade level data from the stock market in Pakistan, we find that when brokers trade on their own behalf, they earn annual rates of return that are 50-90 percentage points higher than those earned by outside investors. Neither market timing nor liquidity provision by brokers can explain this profitability differential. Instead we find compelling evidence for a specific trade-based ‘‘pump and dump’’ price manipulation scheme: When prices are low, colluding brokers trade amongst themselves to artificially raise prices and attract positive-feedback traders. Once prices have risen, the former exit leaving the latter to suffer the ensuing price fall. Conservative estimates suggest these manipulation rents can account for almost a half of total broker earnings. These large rents may explain why market reforms are hard to implement and emerging equity markets often remain marginal with few outsiders investing and little capital raised.

Khwaja, Asim, and Atif Mian. 2005. “Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market.” Quarterly Journal of Economics 120 (4): 1371-1411.Abstract

Corruption by the politically connected is often blamed for economic ills, particularly in less developed economies. Using a loan-level data set of more than 90,000 firms that represents the universe of corporate lending in Pakistan between 1996 and 2002, we investigate rents to politically connected firms in banking. Classifying a firm as political if its director participates in an election, we examine the extent, nature, and economic costs of political rent provision. We find that political firms borrow 45 percent more and have 50 percent higher default rates. Such preferential treatment occurs exclusively in government banks - private banks provide no political favors. Using firm fixed effects and exploiting variation for the same firm across lenders or over time allows for cleaner identification of the political preference result. We also find that political rents increase with the strength of the firm's politician and whether he or his party is in power, and fall with the degree of electoral participation in his constituency. We provide direct evidence against alternative explanations such as socially motivated lending by government banks to politicians. The economy wide costs of the rents identified are estimated to be 0.3 to 1.9 percent of GDP every year.

Pande, Rohini, Timothy Belsey, Lupin Rahman, and Vijayendra Rao. 2004. “The Politics of Public Good Provision: Evidence from Indian Local Governments.” Journal of the European Economic Association Papers and Proceedings. 2004 2 (2-3): 416-426. Publisher's Version
Khwaja, Asim. 2004. “Is Increasing Community Participation Always a Good Thing?.” Journal of the European Economic Association 2 (2-3): 427-436. Publisher's VersionAbstract

This paper considers the impact of community participation on outcomes of development projects. It first offers a theoretical framework for participation by using the property rights literature to model how participation in an activity, in addition to involving information exchange, also results in greater influence in the activity. The model predicts that community participation may not always be desirable. The paper then uses primary data on development projects in Northern Pakistan to provide empirical support for this prediction. It shows that while community participation improve project outcomes in nontechnical decisions, increasing community participation in technical decisions actually leads to worse project outcomes.

Pande, Rohini. 2003. “Can Mandated Political Representation Increase PolicyInfluence for Disadvantaged Minorities? Theory andEvidence from India.” American Economic Review, September 2003 93 (4): 1132-1151.Abstract

A basic premise of representative democracy is that all those subject to policy should have a voice in its making. However, policies enacted by electorally accountable governments often fail to reflect the interests of disadvantaged minorities. This paper exploits the institutional features of political reservation, as practiced in Indian states, to examine the role of mandated political representation in providing disadvantaged groups influence over policy-making. I find that political reservation has increased transfers to groups which benefit from the mandate. This finding also suggests that complete policy commitment may be absent in democracies, as is found in this case.

Pande, Rohini, and Lena Edlund. 2002. “Why Have Women Become Left-Wing? The Political Gender Gap and the Decline in Marriage.” Quarterly Journal of Economics, August 2002 117 (3): 917-961.Abstract

The last three decades have witnessed the rise of a political gender gap in the United States wherein more women than men favor the Democratic party. We trace this development to the decline in marriage, which we posit has made men richer and women poorer. Data for the United States support this argument. First, there is a strong positive correlation between state divorce prevalence and the political gender gap – higher divorce prevalence reduces support for the Democrats among men but not women. Second, longitudinal data show that following marriage (divorce), women are less (more) likely to support the Democratic party