Abstract: This paper estimates the role of improvements in transport infrastructure on households' production decisions in agriculture. The Central Government of India launched a large-scale rural road-building program in 2000, targeting villages that lacked any single all-weather connectivity. Strict guidelines governed eligibility and timing of program road provision. I exploit the precise timing of road construction as a source of exogenous variation in connectivity using a household-level panel in a difference-in-differences framework. I find that households who gain access to improved rural road infrastructure diversify their crop portfolio - they begin to cultivate higher return, non-cereal hybrid crops. Households also increase take up of complementary productive inputs and intensify labor hiring. I find that households subsequently enter into the sales of farm output, indicating a transition from subsistence to market-oriented farming. Evidence from a field survey suggests that these effects operate through an increase in mobility of agricultural workers across connected village labor markets. These findings emphasize the substantial barrier to productive investments in agriculture generated by poor rural road connectivity that hampers the integration of labor markets across space.
Abstract: The idea that worker utility is affected by co-worker wages has potentially broad labor market implications. In a month-long experiment with Indian manufacturing workers, we randomize whether co-workers within production units receive the same flat daily wage or different wages (according to baseline productivity rank). For a given absolute wage, pay inequality reduces output and attendance by 0.24 standard deviations and 12%, respectively. These effects strengthen in later weeks. Pay disparity also lowers co-workers’ ability to cooperate in their self-interest. However, when workers can clearly observe productivity differences, pay inequality has no discernible effect on output, attendance, or group cohesion.