Continued Existence of Cows Disproves Central Tenets of Capitalism?

30 Pages Posted: 24 Aug 2013

See all articles by Santosh Anagol

Santosh Anagol

University of Pennsylvania - Wharton School of Business - Business Economics and Public Policy Department

Alvin Etang

Yale University - Economic Growth Center

Dean S. Karlan

Yale University; Northwestern University - Kellogg School of Management; Innovations for Poverty Action; Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL); National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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Date Written: August 23, 2013

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: Savings, Investment, Profits, Livestock, Labor Markets

JEL Classification: E21, M4, Q1, O12

Suggested Citation

Anagol, Santosh and Etang, Alvin and Karlan, Dean S. and Karlan, Dean S., Continued Existence of Cows Disproves Central Tenets of Capitalism? (August 23, 2013). Available at SSRN: https://ssrn.com/abstract=2315005 or http://dx.doi.org/10.2139/ssrn.2315005

Santosh Anagol (Contact Author)

University of Pennsylvania - Wharton School of Business - Business Economics and Public Policy Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6372
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Alvin Etang

Yale University - Economic Growth Center ( email )

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United States

Dean S. Karlan

Yale University ( email )

Box 208269
New Haven, CT 06520-8269
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Innovations for Poverty Action ( email )

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New Haven, CT 20009
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Massachusetts Institute of Technology (MIT) - Abdul Latif Jameel Poverty Action Lab (J-PAL) ( email )

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United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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