By Ashish Aggarwal (University of Warwick)
This blog is part of a series of New Researcher blogs.
A large share of the working population in developing countries is still engaged in agricultural activities. In India, for instance, over 40% of the employed population works in the agricultural sector and nearly three-quarters of the households depend on rural incomes (World Bank). In addition, the agricultural sector in developing countries is plagued with low investments, forcing workers to rely on natural sources for irrigation as opposed to perennial man-made sources. Gadgil and Gadgil (2006) study the agricultural sector in India during 1951-2003 and find that despite a decline in share of agriculture in GDP in India, severe droughts still adversely impact GDP by 2-5%. In such a context, any unanticipated deviation from normal in rainfall is bound to have adverse effects on productivity and consequently, on incomes of these workers. In this paper, I study whether workers adopt migration as a coping strategy in response to income risks arising out of negative shocks to agriculture. And, if local institutions facilitate or hinder the use of this strategy. In a nutshell, the answers are yes and yes.
I study these questions in the context of indentured migration from colonial India to several British colonies. The abolition of slavery in the 1830s led to a demand for new sources of labour to work on plantations in the colonies. Starting with the “great experiment” in Mauritius (Carter, 1993), over a million Indians became indentured migrants with Mauritius, British Guyana, Natal, and Trinidad being the major destinations. The indentured migration from India was a system of voluntary migration, wherein passages were paid-for and migrants earned fixed wages and rations. The exact terms varied across different colonies, but generally the contracts were specified for a period of five years and after ten years of residency in the colony, a paid-for return passage was also available.
Using a unique dataset on annual district-level outflows of indentured migrants from colonial lndia to several British colonies in the period 1860-1912, I find that famines increased indentures. However, this effect varied according to the land-revenue collection system established by the British. Using the year the district was annexed by Britain to construct an instrument for the land revenue system (Banerjee and Iyer, 2005), I find that emigration responded less to famines in British districts where landlords collected revenue (as opposed to places where individual was responsible for revenue payments). I also find this to be the case in Princely States. However, the reasons for these results are markedly different. Qualitative evidence suggests that landlords were unlikely to grant remissions to their tenants; this increased tenant debt, preventing them from migrating. Interlinked transactions and a general fear of the landlords prevented the tenants from defaulting on their debts. Such coercion was not witnessed in areas where landlords were not the revenue collectors making it easier for people to migrate in times of distress. On the other hand, in Princely states, local rulers adopted liberal measures during famine years in order to help the population. These findings are robust to various placebo and robustness checks. The results are in line with Persaud (2019) who shows that people engaged in indentured migration to escape local price volatility.
Banerjee, Abhijit, and Lakshmi Iyer (2005): “History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India”, American Economic Review, Vol. 95, No. 4, pp. 1190-1213.
Carter, Marina (1993): “The Transition from Slave to Indentured Labour in Mauritius”, Slavery and Abolition, 14:1, pp. 114-130.
Gadgil, Sulochana, and Siddhartha Gadgil (2006): “The Indian Monsoon, GDP and Agriculture”, Economic and Political Weekly, Vol. 41, No. 47, 4887-4895.
Persaud, Alexander (2019): “Escaping Local Risk by Entering Indentureship: Evidence from Nineteenth-Century Indian Migration”, Journal of Economic History, Vol. 79, No. 2, pp. 447-476.