Got (Clean) Milk? Information and Incentives in the Indian Dairy Sector

• Development Workshop

Date and Location

Tuesday, November 19, 2019, 4:10 PM - 5:30 PM
ARE Library Conference Room, 4101 Social Sciences and Humanities

Abstract

We implement a randomized evaluation to pay for lower bacteria count among cooperative dairy producers in rural Karnataka. Incentives for cleaner milk are applied at a group level and paid into a shared cooperative bank account. We further vary whether incentive payments are announced publicly to cooperative members or revealed privately to cooperative management alone. Results show that group incentives are sufficient to improve production quality in village cooperatives. However, this result is sensitive to the way in which incentives are administered. When faced with the prospect of public announcement, managers in a third of cooperatives opt out of receiving incentive payments entirely, undermining any possible incentive effect. Dropout is most common among cooperatives with weaker management oversight. We argue that the decision to opt out only in the face of publicly announced incentives seems inconsistent with the Coase Theroem and other simple models of joint utility maximization.