Essays on the Macroeconomics of Development

Abstract

This thesis contains three chapters on the macroeconomics of development. In the first chapter, I investigate the link between capital depreciation and economic development using both theory and new field data from Uganda. I argue that existing development accounting exercises have overlooked the fact that the rate at which capital breaks down, which in itself is an important determinant of the rate of economic growth, varies across the stages of economic development. I collect detailed measurements on the cost of capital breakdowns across 1,400 Ugandan microenterprises and show that these costs are substantial, around twice as high as comparable estimates from the United States. Furthermore, these costs decrease with local market access and across the firm size distribution. I propose a theory of endogeneous capital depreciation and economic growth which rationalises these patterns and, when calibrated using rich survey and administrative data, explains around 7-9% of the differences in living standards across Uganda. The chapter concludes with a discussion of potential implications of heterogeneous depreciation rates for the measurement of global capital stocks. In the second chapter, coauthored with Michael Walker, Nachiket Shah, Edward Miguel, Dennis Egger, and Felix Samy Soliman, we explore the link between capacity utilisation (or "slack'') and economic development. We collect detailed survey data from microenterprises in Kenya and find that underutilisation of labor and capital is severe and especially pronounced for remote and small firms. We rationalise these findings using a model of input indivsibilities and calibrate it to a rural economy of Western Kenya. We use the model as a laboratory to study the macroeconomic effects of a cash transfer policy and show how slack can generate meaningful real multipliers of such policies. In the third chapter, coauthored with Gabriel Kreindler, Arya Gaduh, Rema Hanna, and Ben Olken, we explore optimal public transit provision in Jakarta. We use the expansion of the bus system to study how new direct connections, changes in bus travel time, and wait time reductions affect bus ridership and aggregate flows, and estimate a transit network demand model. Commuters in Jakarta are 2-3 times more sensitive to wait time than bus time, and inattentive to long routes. We develop a flexible framework to characterize optimal networks. A less concentrated network would increase ridership and commuter welfare.