Caste as an Impediment to Trade

Abstract

We compare outcomes across two types of villages in rural India. Villages vary by which caste is dominant (owns the majority of land): either a low or high caste. The key finding is that income is substantially higher for low-caste households residing in villages dominated by a low caste. This seems to be due to a trade breakdown in irrigation water across caste groups. All else equal, lower caste water buyers have agricultural yields which are 45 percent higher if they reside in a village where water sellers are of the same caste compared to one where they are not. (JEL O12, O13, O17, O18, Q15, R23, Z13)