On the Negative Returns of Owning Cows and Buffaloes

Santosh Anagol, Alvin Etang, & Dean S. Karlan claim in a new paper:

We examine the returns from owning cows and buffaloes in rural India. We estimate that when valuing labor at market wages, households earn large, negative average returns from holding cows and buffaloes, at negative 64% and negative 39% respectively. This puzzle is mostly explained if we value the household’s own labor at zero (a stark assumption), in which case estimated average returns for cows is negative 6% and positive 13% for buffaloes. Why do households continue to invest in livestock if economic returns are negative, or are these estimates wrong? We discuss potential explanations, including labor market failures, for why livestock investments may persist.

Instead of providing an answer the authors put forward the puzzle, they explain:

In Hinduism, the cow is a symbol of wealth, strength, abundance, selfless giving and a full earthly life.20 As almost all the sampled households reported that they were Hindu, they may also derive spiritual returns from cattle ownership. The foregone returns compared to their next best investment alternative would effectively be the cost of religiosity in this context. This of course does not explain the results for buffaloes. P. 14.

 And the implications for aid:

Our results suggest that merely transferring an asset alone may not be sufficient to generate higher income (beyond the value of the transferred asset). P. 15.