Price convergence across regions in India

The paper attempts to examine whether there is price convergence across various regions in India. Using panel unit root tests that are robust to cross-sectional dependence, it is found that relative price levels among various regions in India are mean-reverting. Further, we decompose each series into a set of common factors and idiosyncratic components. The decomposition enables us to test stationarity and estimate half-lives of the common factors and the idiosyncratic components separately. Both these components are found to be stationary. Idiosyncratic price shocks, however, are found to be more persistent as compared to the common factor. Results also indicate that transportation cost proxied by distance can explain a part of the variation in prices between two locations in India. The authors would like to thank Dibyendu Bhaumik for arranging the data for this study. Views expresed in the paper are personal and do not reflect the views of the organizations.     

Choosing to keep up with the Joneses and income inequality

We study a variant of the conventional keeping-up-with-the-Joneses setup, in which heterogeneous-ability agents care both about consumption and leisure and receive an utility premium if their consumption exceeds that of the Joneses’. Unlike the conventional setup in which all agents are assumed to want to participate in the rat race of staying ahead of the Joneses, our formulation explicitly permits the option to drop out. Mean-preserving changes in the spread of the underlying ability distribution, via its effect on the economy-wide composition of rat-race participants and drop-outs, have important consequences for induced distributions of leisure and income, consequences that are unobtainable using conventional keeping-up preferences.     

Bond yields compared to amortizing yields

A large amount of theoretical research has been conducted concerning the impact of debt instrument features such as callability, tax treatment, and default risk upon valuation and yield. Almost all this research has been performed on bond-like instruments; this is unfortunate since a large proportion of debt instruments is amortizing. This research develops a model for the spread between bonds and amortizing instruments with otherwise identical features. The shape of the term structure is crucial. Furthermore, the behavior of the spread is systematically related to the level of interest rates, tax rates, degree of default risk, and maturity where the maturity relation changes sign at intermediate maturities.     

本土保卫战的六大秘笈

根据《经济学人智库》预测,到2010年,新兴市场将占到全球GDP的45％,以及GDP增长的60％。中国、印度、东盟等市场都变得愈发重要,但这并不意味着这些市场将自然地归属本土企业,他们必须面对跨国公司来势汹汹的挑战。跨国公司无论在实力还是经验上,通常都更胜本土企业一筹,但也并不总是大获成功。Yahoo!和eBay在中国市场上就因百度与淘宝的抵抗而止步。许多西方汽车制造商在印度试图建立业务,也步履艰难。NEC和松下退出中国的手机市场。日本零售商八佰伴放弃了其在中国的运营。     

Regional Housing Prices in the USA: An Empirical Investigation of Nonlinearity

Existing literature on housing prices is predominantly in a linear framework, and an important question that has not been addressed is whether housing prices exhibit nonlinearity. We examine Smooth Transition Autoregressive (STAR) model based nonlinear properties of housing prices over the 1969–2004 period for the entire US and the four regions. Our main findings are (1) housing price for the entire US and all regions except for the Midwest show non-linearity, (2) the dynamic properties implied by the nonlinear estimation explain the typical patterns that have characterized each housing market, and (3) results of Granger causality tests look more plausible in the nonlinear framework where we find stronger evidence of Granger causality from housing price to employment and also from mortgage rates to housing price.

Rural-urban migration in economic development

Abstract. This paper provides a review of the theoretical literature on rural–urban migration in contemporary LDCs. The paper begins with a brief discussion of the Lewis model before going on to discuss the Todaro and the Harris–Todaro models and the large literature which these models have spawned. The question of job search in the context of migration and the role of family members in migration decisions are considered next. The paper then takes a closer look at the Informal sector and also sets out alternative migration functions to the ones usually employed in the literature. The paper concludes with a brief note on some of the important implications arising from our study.     

Informal sector, income inequality and economic development

This paper addresses - with the help of numerical simulations - some of the issues relating to income distribution in the context of development of an economy with an informal sector and migration of both low- and high-skilled workers from the rural to the urban area. A major aim has been to see under what conditions we do or do not get an inverted U-shaped curve of income distribution. The paper finds that the tendency always is for the Gini coefficient to rise and then decline. However, once it starts declining, it need not continuously decline; it may rise, then decline, then rise again and indeed rise above the previous peak before starting to decline again and may well end at the end of the simulation at a higher value than at the start. Any case for the redistribution of income is seen to be much stronger at the later stages of development that at earlier stages, even though at later stages, Gini coefficient may be lower than at earlier stages. The policy implications of the findings are considered.