Search

Highlights • I examine whether households' consumption is influenced by that of their peers using Indian data. • I employ an instrumental variables/fixed effects approach. • I find robust evidence of peer effects in consumption. • Thus policies that influence household consumption are likely to have social spillovers. Abstract This paper examines peer effects in consumption in context of a less developed country. Specifically, the question that I seek to answer is whether consumption expenditure of a household is influenced by that of its peers in a less developed country. To examine this question, I use newly available household level data from India. I define a household's peer group as other households living in its village/neighborhood. In assessing the influences of peers in this context, there are two key empirical challenges including shared group-level unobservables, and simultaneity of peer influences. I address these issues by using an instrumental variables/fixed effects approach that compares households in the same district but different villages/neighborhoods who are thus exposed to different sets of peers. In particular, I use plausibly exogenous variation in idiosyncratic expenditure shocks – which are accidental and negative in nature – faced by peers as instruments for peers' consumption expenditure. Preferred specification suggests that a one standard deviation increase in average consumption expenditure of a household's peers causes the household's own consumption expenditure to increase by 0.42 standard deviations. Falsification tests and robustness checks support the validity of my results. My findings suggest that policies that influence a household's consumption will also affect the consumption of the household's peers through social interactions. This implies traditional analyses of consumption intervention programs that do not take into account such spillover effects will understate the total social impact of the programs, and hence lead to inaccurate evaluation of cost-effectiveness of such programs. [ABSTRACT FROM AUTHOR]

Summary It is well known that consumption patterns change with income. Relative price changes would therefore affect rich and poor consumers differently. Yet, the standard price indices are not income-specific, and hence, they cannot account for such differences. In this paper, we study consumption inequality in India, while fully allowing for non-homotheticity. We show that the relative price changes during most of the period from 1993 to 2012 were pro-poor, in the sense that they favored the poor relative to the rich. As a result, we also find that conventional measures significantly overstate the rise in real consumption inequality during this period. The main lesson from our study is the importance of accounting for non-homotheticity when measuring inequality. The price index literature has, as of yet, paid relatively little attention to this. In our application, however, it turns out that the allowance for non-homotheticity is quantitatively much more important than much discussed adjustments, such as those for substitution in consumption. [ABSTRACT FROM AUTHOR]

Drawing on a number of case studies from Tamil Nadu, this paper shows that bonded labour is not a relic of the past, but surprisingly contemporary. Refuting the tenets of the semi-feudal thesis, we argue that unfree labour can go hand in hand with capitalism, and that it can be initiated and sustained by capital itself in order to accumulate surplus value. Going against the tenets of the de-proletarianization thesis, we suggest that bonded labour is not always the preferred working arrangement for capitalism. Bonded labour should be examined in connection with specific historical contexts, the changing nature of the economy, the evolution of political forces and modes of socialization. I argue that bonded labour results from a specific regime of accumulation characterized by cheap labour, increased domestic demand sustained through household debt, as well as modes of conflict, contestation and worker identity formation that engage with both governmental programmes and consumerism. [ABSTRACT FROM AUTHOR]