How Efficiently is Capital Allocated? Evidence from the Knitted Garment Industry in Tirupur

This paper studies the effect of community identity on investment behaviour in the knitted garment industry in the South Indian town of Tirupur. We document very large and systematic differences in both levels of capital stock and the capital intensity of production in firms owned by people from two different community groups. We argue that the differences in investment cannot be explained by productivity differences alone. We suggest that the most likely explanation is that the two communities differ in their access to capital.     

Capital flows to Asia and Latin America: Does institutional quality matter?

Using a sample of 28 emerging market economies from Asia and Latin America spanning 1990–2013, we show that the marginal effect of capital flows on growth is positive and contingent on the threshold level of institutional quality (IQ). The conditional effect of capital flows holds for both the income per capita growth and total factor productivity (TFP) growth. We also determine the different threshold levels of IQ at which the marginal effect of capital flows is positive. The overall level of IQ in the Asian countries is superior to the Latin American countries and requires a lower threshold level to exert any positive effect. While the same conditional effect of IQ holds in Latin America for TFP growth, this effect is reversed in Asia. For very high levels of IQ (91st percentile), the marginal effect of capital flows on TFP growth in Asia is almost negligible. The marginal effects also vary based on the composition of capital flows in each region.     

Impact of Food Brand Controversy on Consumers’ Attitude Toward Brand and Company

It is critical to understand the impact of controversy on the consumer. There is a scarcity of research measuring post-controversy consumer attitude on both product and corporate brand during a controversy. The study is based on a recent brand controversy linked with instant noodle brand “Maggi” in India. The study examines impact on brand perceived quality, credibility, trust and loyalty, and attitude about brand and company. Data have been collected during July–October 2015 when the brand Maggi was banned in India due to quality-related controversy. Results indicate that respondents, with higher post-controversy brand loyalty, hold positive attitudes about brand. The interaction effect reveals that the relationship is significant and positive. During controversy, consumers’ attitude about brand and company is not identical. For a strong brand, consumers may have positive attitude but they become quite negative about company.     

Contribution to a public good under subjective uncertainty

This paper examines how voluntary contributions to a public good are affected by the contributors' heterogeneity in beliefs about the uncertain impact of their contributions. It assumes that contributors have Savagian preferences that are represented by a two‐state‐dependent expected utility function and different beliefs about the benefit that will result from the sum of their contributions. We establish general comparative statics results regarding the effect of specific changes in the distribution of beliefs on the (unique) Nash equilibrium provision of the public good, under certain conditions imposed on the preferences. We specifically show that the equilibrium public good provision is increasing with respect to both first‐ and second‐order stochastic dominance changes in the distribution of beliefs. Hence, increasing the contributors' optimism about the uncertain benefit of their contributions increases aggregate public good provision, as does any homogenization of these beliefs around their mean.     

Binge watching: An exploration of the role of technology

Watching television shows in quick succession on the Netflix and Amazon Prime platforms is on the rise. Although widespread, this binge watching behavior has received limited attention from marketing academics. The current study conceptualizes binge watching needs and examines their effect on the gratifications obtained from binge watching. We apply the lens of uses and gratifications (U&G) theory for model development and test the model empirically, using data from two cities in India. We add a new category of needs, namely technology-related needs, to the existing psycho-sociological-related needs (named as content-related needs in this paper) present in plain-old-television studies (POTS). We find that a technology-related need—that is, modal experience (the presence of media content in various formats leading to superior experience)—significantly impacts gratification from binge watching. We also find a strong moderating effect of self-control, used in previous studies of binge-eating and binge-shopping, in which the effect of modal experience, navigability and parasocial interaction need gratification is heightened for consumers who have low levels of self-control. We build on these findings to suggest implications for marketers, advertisers, and consumer-advocacy groups.     

Two Cheers and a Qualm for Behavioral Environmental Economics

Behavioral economics can gain more in-roads into environmental economics if we better understand why exchange institutions fail, more effectively reduce health risks and environmental conflicts, encourage more coordination and cooperation, design better incentive systems, more accurately estimate economic measures of value, and promote more protection at less cost. Behavioral economics deserves two cheers for advancing ideas of context-dependence and social preferences, which we illustrate with two examples of recent research.     

Semiparametric binary regression models under shape constraints with an application to Indian schooling data

We consider estimation of the regression function in a semiparametric binary regression model defined through an appropriate link function (with emphasis on the logistic link) using likelihood-ratio based inversion. The dichotomous response variable Δ$\Delta$ is influenced by a set of covariates that can be partitioned as (X,Z)$(X,Z)$ where Z$Z$ (real valued) is the covariate of primary interest and X$X$ (vector valued) denotes a set of control variables. For any fixed X$X$, the conditional probability of the event of interest (Δ=1$\Delta =1$) is assumed to be a non-decreasing function of Z$Z$. The effect of the control variables is captured by a regression parameter β$\beta$. We show that the baseline conditional probability function (corresponding to X=0$X=0$) can be estimated by isotonic regression procedures and develop a likelihood ratio based method for constructing asymptotic confidence intervals for the conditional probability function (the regression function) that avoids the need to estimate nuisance parameters. Interestingly enough, the calibration of the likelihood ratio based confidence sets for the regression function no longer involves the usual χ²${\chi }^2$ quantiles, but those of the distribution of a new random variable that can be characterized as a functional of convex minorants of Brownian motion with quadratic drift. Confidence sets for the regression parameter β$\beta$ can however be constructed using asymptotically χ²${\chi }^2$ likelihood ratio statistics. The finite sample performance of the methods are assessed via a simulation study. The techniques of the paper are applied to data sets on primary school attendance among children belonging to different socio-economic groups in rural India.     

Financial development and the instability of open economies

This paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies. Our basic model is a dynamic open economy model with a tradeable good produced with capital and a country-specific factor. We also assume that firms face credit constraints, with the constraint being tighter at a lower level of financial development. A basic implication of this model is that economies at an intermediate level of financial development are more unstable than either very developed or very underdeveloped economies. This is true both in the sense that temporary shocks have large and persistent effects and also in the sense that these economies can exhibit cycles. Thus, countries that are going through a phase of financial development may become more unstable in the short run. Similarly, full capital account liberalization may destabilize the economy in economies at an intermediate level of financial development: phases of growth with capital inflows are followed by collapse with capital outflows. On the other hand, foreign direct investment does not destabilize.