NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Holy Cows or Cash Cows?

Orazio Attanasio, Britta Augsburg

NBER Working Paper No. 20304
Issued in July 2014
NBER Program(s):   DEV   EFG

In a recent paper, Anagol, Etang and Karlan (2013) consider the income generated by these owning a cow or a buffalo in two districts of Uttar Pradesh, India. The net profit generated ignoring labour costs, gives rise to a small positive rate of return. Once any reasonable estimate of labour costs is added to costs, the rate of return is a large negative number. The authors conclude that households holding this type of assets do not behave according to the tenets of capitalism. A variety of explanations, typically appealing to religious or cultural factors have been invoked for such a puzzling fact.

In this note, we point to a simple explanation that is fully consistent with rational behaviour on the part of Indian farmers. In computing the return on cows and buffaloes, the authors used data from a single year. Cows are assets whose return varies through time. In drought years, when fodder is scarce and expensive, milk production is lower and profits are low. In non-drought years, when fodder is abundant and cheaper, milk production is higher and profits can be considerably higher. The return on cows and buffaloes, like that of many stocks traded on Wall Street, is positive in some years and negative in others. We report evidence from three years of data on the return on cows and buffaloes in the district of Anantapur and show that in one of the three years returns are very high, while in drought years they are similar to the figures obtained by Anagol, Etang and Karlan (2013).

download in pdf format
   (326 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w20304

Users who downloaded this paper also downloaded* these:
Schorfheide, Song, and Yaron w20303 Identifying Long-Run Risks: A Bayesian Mixed-Frequency Approach
Carlin, Jiang, and Spiller w20268 Learning Millennial-Style
Kilenthong and Townsend w20275 A Market Based Solution to Price Externalities: A Generalized Framework
Aruoba and Fernández-Villaverde w20263 A Comparison of Programming Languages in Economics
Buch and Goldberg w20286 International Banking and Liquidity Risk Transmission: Lessons from Across Countries
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us