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This paper examines whether a one-time, extensive, but temporary shock to cash supply can affect the adoption of digital payments. We exploit the 2016 demonetization episode in India, which overnight discontinued 86% of cash in circulation. Using novel administrative data from retail debit card transactions, we identify a 12% increase in digital payments in areas adversely affected by the cash shortage, which persisted well after the restoration of cash supply. Examining mechanisms, we find a limited role for social networks and stronger support for learning by doing. Further, information frictions hinder the immediate adoption of digital payments.

We study the impact of a consumption tax reform on firm capital and productivity by examining India's replacement of the sales tax with a value‐added tax (VAT). Unlike the sales tax, the VAT allowed firms to offset their tax liability with VAT paid on capital inputs, effectively reducing the tax‐related cost of capital. Exploiting the staggered adoption of the tax reform across Indian states, we show that VAT adoption increased firm capital by 3%. The effects are driven by financially‐constrained firms – an important source of heterogeneity in a developing country context. We also document a corresponding improvement in the productivity of financially‐constrained firms. Our findings thus suggest that beyond revenue generation, consumption tax reforms can have the additional effect of stimulating investment and productivity in resource‐constrained environments.

In this paper, we consider whether the representation of historically disenfranchised minorities in government can reduce violence suffered by these groups. To answer this question, we examine the impact of political parties that represent India’s marginalized Scheduled Castes (SCs). We address the endogenous selection of minority-favoring parties using state-level variation in aggregations of close election outcomes. We find that a 10 percentage-point increase in representation reduces the minority murder rate by 3 percentage points. An analysis of channels suggests that politicians respond to minority constituents by increasing police effort in responding to the victimization of SCs, which may have the effect of deterring future offenders. Moreover, improvements in self-reported attitudes toward government institutions suggest that our results are not the product of negative reporting bias in government crime statistics (JEL: J15, D72, K14).

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