NOVAFRICA Seminar:“Dishonesty in Milk Markets in India”
On Wednesday, December 9th, at 2.30pm, the NOVAFRICA Center welcomes Devesh Rustagi, from Goethe University of Frankfurt to present his work on the role of honesty of milkmen on milk quality in India.
Markus Kröll, Devesh Rustagi
Bovine milk is recognized as an important source of nutrition by FAO and for its potential to alleviate malnutrition. In many developing countries, milk is largely sourced from informal markets, which are prone to rampant cheating from adulteration of milk with water, leading to a loss of valuable nutrition. Evidence suggests that though many milkmen cheat, there is a large variation. We study in such markets whether individual milkmen vary in their motivation for honesty and whether this variation can explain why some milkmen cheat but others do not in actual informal milk markets. Our study takes place in India, where milk quality is very costly and difficult to detect. We use statistical methods to measure a milkman’s motivation for honesty in a laboratory experiment that involves rolling a die and reporting its outcome. But, if some milkmen resort to partial lying then statistical classification may misclassify dishonest milkmen as honest, which may have implications for the association between motivation for honesty and behavior in actual markets. As a result, we complement our experiment with technical innovation, which additionally allows us to obtain actual outcomes of the die roll. This innovation allows us to detect dishonesty at both extensive and intensive margins. We find that qualitatively both statistical or Bluetooth methods yield similar results: dishonest milkmen cheat their customers by adding substantially more water to milk than honest milkmen. However, the statistical method is unable to detect a large share of partially dishonest milkmen. We show that these partially dishonest milkmen cheat substantially more than honest milkmen, but dishonest milkmen cheat even more than partially dishonest milkmen. As a result, statistical estimates are biased downwards by up to 20 percent. Our findings can be interpreted as pointing out the importance of motivation for honesty, as distinguished from institutions, in informal markets that are crucial for meeting human health and nutrition in developing countries.