Research Statement Abhinav Narayanan November 4, 2015

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Research Statement
Abhinav Narayanan∗
November 4, 2015
My research interests are in the areas of development economics, macroeconomics and labor
economics. Currently, my research focuses on informality in developing countries. Despite the
fact that the informal sector contributes a significant fraction to a developing country’s GDP and
absorbs a large share of the labor force, the topic of informality has not been rigorously analyzed in
the economic literature. I believe a firm understanding of informality in a country’s development
process is necessary for effective policy prescriptions. Thus, in my job market paper, I examine
whether informal workers in India (workers with no employment benefits) face entry barriers into
formal employment or whether they choose informal employment as a preferred alternative over
formal employment. In my second paper, I examine the effect of public infrastructure on formal
and informal sectors at the level of the firm. More generally, I am interested in pursuing questions
pertaining to economic development focusing mainly on developing countries.
Understanding informal employment: Competitive choice or a result of labor
market segmentation? (Job market paper)
As of 2011-12, informal workers in India accounted for 85.8 percent of the total labor force. In this
paper, I use India’s National Sample Survey data on Employment and Unemployment (2011-12)
to test whether the large share of informal employment is due to labor market segmentation or a
result of competitive choice. Results show that workers can freely enter informal employment. In
contrast, there is no evidence of self-selection into formal employment. Based on this evidence, we
cannot reject the labor market segmentation hypothesis for the Indian labor market. The wage gap
decomposition results show that informal workers earn less than formal workers not only because
they are less skilled, but also because they receive lower returns to their endowments compared to
the formal workers. Thus, policies that focus on skill development may be necessary but are not
sufficient to increase formal job opportunities and reduce the formal-informal wage gap.
∗ Ph.D
candidate. Department of Economics. University of Georgia. Email: abhinav.narayanan@gmail.com
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Spillover effects of public infrastructure: Implications for the formal and informal sector firms in India (coauthored with Santanu Chatterjee)
In this paper, we measure the importance of public infrastructure for the productivity of formal
and informal sector firms in India. While previous studies have relied mainly on the formal sector
at an aggregated level, we focus on both the formal and informal sectors at the level of the firm.
Using data for about 32,000 formal-sector and 83,000 informal-sector manufacturing firms from
the Annual Survey of Industries (ASI) and the National Sample Survey Organization (NSSO) for
2010, along with different measures of public investment spending, we find that while the sectoral
output elasticities of public capital are positive and significant, they are significantly larger for
formal sector firms: by a factor of about three on average. Quantile regressions show that output
elasticities of public capital are more or less uniform across small and large formal sector firms (in
terms of output). For the informal sector, however, larger firms seem to benefit more from public
capital than smaller firms. On the other hand, states that invest more in public infrastructure have
higher private capital intensity at the firm level for the informal sector. This suggests an important
role for public investment in increasing the usage of private capital in the informal sector, which
traditionally has had extremely low levels of capital intensity.
Going forward
In my job market paper I find evidence of segmentation in the Indian labor market. In my future
research, I would like to study the mechanisms that lead to labor market segmentation with respect
to formal and informal employment. Specifically, I want to examine the entry barriers that workers
face when entering formal employment that can throw light on the causes of informal employment.
In my second paper with Santanu Chatterjee, I find positive output elasticities of public infrastructure for both formal and informal sectors. Thus, informal production may congest public
investment and generate a negative externality on formal output and employment. In my future
work, I would like to examine theoretically the link between informal and formal sectors in the
presence of congestion. Since, public investments are tied to fiscal policy, I would also like to
analyze the dynamic absorption of fiscal policy in the presence of congestion.
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