Trade liberalization and unemployment: Theory and evidence from India

A widely held view among the public is that trade liberalization increases unemployment. Using state and industry-level unemployment and trade protection data from India, we find no evidence of any unemployment increasing effect of trade reforms. In fact, our state-level analysis reveals that urban unemployment declines with trade liberalization in states with flexible labor markets and larger employment shares in net exporter industries. Moreover, our industry-level analysis indicates that workers in industries experiencing greater reductions in trade protection were less likely to become unemployed, especially in net export industries. Our results can be explained within a theoretical framework incorporating trade and search-generated unemployment and some institutional features of the Indian economy.     

Immigration and Unemployment: New evidence from Australia and New Zealand

This study uses a new Granger no-causality testing procedure developed by Toda &Yamamoto (1995) to contribute to the debate on immigration and unemployment in Australia and New Zealand. It investigates a possible causal linkage between these variables in a six-variable vector autoregression (VAR) model. The research finds no Granger causality between immigration and unemployment. Instead, it finds evidence of Granger causality running from industrial structural changes, measured by the Stoikov and HDB indices, to unemployment, and from several other economic variables to unemployment.     

Firm size distribution and employment fluctuations: Theory and evidence

We show that the firm-size distribution is an important determinant of the relationship between an industry's employment and output. A theoretical model predicts that changes in demand for an industry's output have larger effects on employment, resulting from adjustments at both the intensive and extensive margin, in industries characterised by a distribution that has a lower density of large firms. Industry-specific shape parameters of the firm size distributions are estimated using firm-level data from Germany, Sweden and the UK, and used to augment a relationship between industry-level employment and output. The empirical results align with the predictions of the theory.     

Unemployment and growth: some empirical evidence from structural time series models

This study investigates the empirical relationship between unemployment and growth in a number of OECD economies. A structural time series model is used for labour productivity growth to demonstrate that, in most economies, there seems to be a negative correlation between unemployment and labour productivity growth. The results provide little support for the theory that recessions may stimulate productivity growth. The use of a structural time series approach allows an attempt to model the underlying dynamics of productivity growth jointly with the effect of unemployment.     

Trade policy & lobbying effectiveness: Theory and evidence for India

How do we understand differences in effectiveness in lobbying for trade policy? To explain lobbying effectiveness, I introduce a new measure into Grossman and Helpman's (1994, American Economic Review 84: 833–850) model of protection-for-sale (PFS). Differences in effectiveness are explained on the basis that some groups make a better case for protection by sending a signal regarding information they possess and that is considered by policy makers before setting trade policies. I begin by estimating a standard PFS model for India using a measure of political organization, a common approach in the empirical literature on PFS. To overcome the need to define such a binary political organization variable, I then use panel data to estimate the new measure of relative lobbying effectiveness. For the most effective sectors, a high output to import ratio translates into higher trade protection; for the least effective sectors, higher output to import ratio translates into lower trade protection. Examining some of the political economy influences on lobbying effectiveness, I find that producing similar goods reduces the positive effect of geographical proximity on effectiveness. Hence, within a sector, firms in close proximity and producing similar goods compete to lobby rather than cooperating or free-riding.     

Monetary aggregates and core inflation: evidence from India

This study constructs a model-based core inflation for India using Divisia monetary aggregates instead of traditional money measures with the methodology proposed by Bagliano and Morana (2003) and evaluates its forecasting abilities. The core inflation derived from Divisia monetary aggregates is found to be a better leading indicator of measured inflation than the core inflation derived from traditional money measures. These results argue for a case in favour of using monetary aggregates in the construction of core inflation for policy purposes.     

Capital-enhanced equilibrium exchange rate: evidence from India

This article examines the validity of the capital-enhanced equilibrium exchange rate (CHEER) approach using quarterly data ranging from 1993Q1 to 2016Q2. Using unit root break test and structural break cointegration technique, our overall results indicated that the CHEER is invalidated once a structural break is accounted for in the cointegration relationship. The rejection of the validity could be attributed to the asymmetry in the capital flows and exchange rates being not fully flexible.     

Unemployment hysteresis - macro evidence from 16 OECD countries

This paper investigates empirically the presence ofunemployment hysteresis in 16 OECD countries, applying aggregate quarterly unemployment rates covering the past 25 years. Alternative test procedures are discussed and employed, posing both stationarity and hysteresis as null hypotheses. The results suggest that hysteresis effects are highly significant in Australia and Canada, and to a lesser extent also significant in most European countries and in Japan. Only in the USA, the presence of unemployment hysteresis is strongly and consistently rejected.Without attributing to them opinions or errors in the paper, I wish to thank Steinar Strøm, Ragnar Nymoen, Arvid Raknerud, Anders Rygh Swensen, Jeremy Smith and two referees for helpful comments.     

Economic reforms,growth and well-being: evidence from India

This study examined economic well-being of sub-national units in India since the economic reforms. For this purpose, the study constructed well-being index for 17 major states of India for the period 1981–2011 based on five broad dimensions. Our results showed that the economic well-being of states has declined since the reforms. The interstate disparities have increased and the states (except Punjab and West Bengal) which performed well prior to the reforms continued to perform well in the post-reform years too. In addition, our regression results for the high well-being and low well-being states revealed that the reforms have benefited more developed high well-being states, rather than low well-being states. While human capital was found significantly and positively related to per capita incomes in both groups of the states, financial development was positively related in high well-being states, but a negative association was visible in the low well-being states.     

Gender diversity and firm performance: evidence from India and Singapore

ABSTRACT

This study investigates if gender diversity on boards is an effective driver of financial performance. For this purpose, this study choses two countries, one of which has the soft law approach (Singapore) while the other has mandatory requirements (India) on corporate boards gender diversity. By doing so, it examines if there is a comparability between the listed firms of the two countries. Our results suggest that the gender diversity has a positive and significant effect on the financial performance of the firms of both the countries. Although, the gender diversity of the two countries does not seem to affect the growth opportunities of both the countries. Further, our results indicate that the board characteristics affect the performance positively and significantly when the sample is divided into five quantiles for the firms in these two countries. These findings have implications to the managerial decision making and relevance to stewardship theory and resource dependency theory.     

Unemployment Insurance in Theory and Practice

A hallmark of modern labor economics is the close interplay between the development of theory, data sources and econometric testing. The evolution of the economic analysis of unemployment insurance provides a good illustration. New theoretical approaches, in particular job-search theory, have inspired a large amount of empirical research, some of it methodologically innovative and most of it highly relevant for economic policy. The paper presents a broad survey and an assessment of the economic analysis of unemployment insurance as it has evolved since the 1970s.     

Regulatory independence and thermal power plant performance: evidence from India

Journal of Regulatory Economics - We examine the role of regulatory independence on electricity generation performance in India. Electricity generation in India is exposed to several regulatory...     

Global slack hypothesis: evidence from China,India and Pakistan

It is widely believed that globalization has changed inflation process. The global resource capacity reduces responsiveness of inflation to domestic activity and increases responsiveness of inflation to global resource capacity. This global slack hypothesis is tested using different theoretical specifications, which also relate domestic output elasticity and foreign output elasticity to the degree of trade openness of an individual economy. The results reject this hypothesis. The global resource capacity does not drive domestic inflation. The impact of globalization has not increased in the inflation process, and the results yield important policy implications for monetary policy formulation. The global resource capacity does not affect ability of the central banks to stabilize inflation, real economic activity and also respond to the volatility of output growth.     

The return to education and its distribution in urban China: evidence from quantile regression analysis

Based on Chinese Households Income Projects in 2002, this paper discusses the relationship between the return to education and the quantiles of income distribution. The findings in this paper show that the return to education is lower for the higher quantiles, while the estimators also depend on the choice of control variables. The methodology of the quantile regression might be helpful in adjusting the ability bias in the estimation on return to education. The policy implications of the paper highlight the impact of the education expansion in boosting the income growth for those in lower quantiles.     

Industrial Location and Spatial Inequality: Theory and Evidence from India

The authors argue that spatial inequality of industry location is a primary cause of spatial income inequality in developing nations. Their study focuses on understanding the process of spatial industrial variation: identifying the spatial factors that have cost implications for firms, and the factors that influence the location decisions of new industrial units. The analysis has two parts. First the authors examine the contribution of economic geography factors to the cost structure of firms in eight industry sectors and show that local industrial diversity is the one factor with significant and substantial cost‐reducing effects. They then show that new private sector industrial investments in India are biased toward existing industrial and coastal districts, whereas state industrial investments (in deep decline after structural reforms) are far less biased toward such districts. The authors conclude that structural reforms lead to increased spatial inequality in industrialization, and therefore, income.     

Corruption and inefficiency: Theory and evidence from electric utilities

We investigate the determinants of the efficiency of firms with a focus on the role of corruption. We construct a simple theoretical model where corruption increases the factor requirements of firms because it diverts managerial effort away from factor coordination. We then exploit a unique dataset comprising firm-level information on 80 electricity distribution firms from 13 Latin American countries for the years 1994 to 2001. As predicted by the model, we find that more corruption in the country is strongly associated with more inefficient firms, in the sense that they employ more inputs to produce a given level of output. The economic magnitude of the effects is large. The results hold both in models with country and firm fixed effects. The results survive several robustness checks, including different measures of output and efficiency, and instrumenting for corruption. Other elements associated with inefficiency are public ownership, inflation, and lack of law and order, but corruption appears to play a separate and more robust role.     

Bank lending channel in India: evidence from state-level analysis

This paper seeks to answer two questions: first, do monetary policy shocks affect the size of bank loans, and second, do bank loans affect real economic activity? Using annual panel data on the Indian states from 1996 to 2008, we find that money demand shocks have large and statistically significant impact on bank loans. Furthermore, using money demand shocks as instruments for bank lending à la Driscoll (J Monet Econ 51:451–471, 2004), we find an economically large and statistically significant effect of bank loans on output. Our findings, to some extent, reflect the dominant role played by banks in the India’s overall financial system.