Inflation Dynamics in India: Relative Role of Structural and Monetary Factors

This paper examines the relative role of structural and monetary factors in the variation of inflation in India over the period 1996–1997:Q1 to 2013–2014:Q4. The paper finds that both the monetary factors and the output gap has significant role. The role of the output gap in inflation is found more prominent than the monetary factors like broad money growth, interest rate and change in exchange rate. The depreciation of exchange rate and broad money growth stimulates inflation where as the interest rate is identified as an anti-inflationary monetary instrument. In view of a comprehensive policy for price stability, it is imperative to know the role of sectoral output gap in inflation. The paper, therefore, enquires the relative role of the primary, secondary and tertiary sector output gap in inflation. Output gap of each of these three sectors provokes inflation where the contribution of tertiary sector output gap is found to be the maximum followed by the primary sector and the secondary sector output gap. The prominent role of the output gap and comparatively passive role of monetary factors does not necessarily imply a non-effective monetary policy but suggests that controlling inflation only through the monetary management may not be effective.

     

International Trade,Migration and Unemployment – The Role of Informal Sector

This paper provides an elaborate general equilibrium framework by including informal economic activities in a model of trade, migration and unemployment. Existence of informal activities is critical in generating positive employment effects of liberal trade policies. Following a tariff cut informal wage increases and rate of unemployment goes down under reasonable conditions. Next we generalize the benchmark model to capture the phenomenon of sequential migration: from agriculture to urban informal sector, and then to urban formal sector. Positive employment effect of reformatory trade policy partly owes to the fact that the presence of informal sector directly reduces the cost of migration and, hence, further induces the process of outmigration from agricultural sector. The paper also extends the benchmark model to include both informal intermediate and final good.     

A quantitative analysis of employment guarantee programmes with an application to rural India

This paper examines the welfare effects of a workfare programme in an economy where agents face exogenous income shocks and are unable to insure themselves through private markets. A dynamic general equilibrium model is calibrated using data from two ICRISAT villages in the Indian state of Maharashtra, which had a functioning Employment Guarantee Scheme (EGS), in the period 1979–84. The optimal wage and the welfare gains of the program depend on how productive the EGS is, relative to the private sector. When agents are paid the optimal wage rate, they do not hold the non-interest-bearing asset for precautionary savings and all insurance is provided by the EGS. There are significant welfare gains from paying the optimal wage rate as opposed to simply paying the marginal product of labour in the EGS.     

SEEKING RENT IN THE INFORMAL SECTOR

Rent seeking within the vast informal segment of the developing world is a relatively under‐explored topic in the interface of labor market policies and public economics. Moreover, how rent seeking and corruption within the informal segment gets affected by economic reforms targeted for the formal sector is rarely discussed in the literature. This paper fills the gap. We identify conditions under which economic reform in the formal segment will increase the rate of corruption or rent seeking in the informal sector and raise the pay‐off for those involved in rent‐seeking activities. When the formal sector contracts due to reforms, rent seeking in the informal sector may increase and lower the level of welfare unconditionally. Economic reforms may increase corruption instead of reducing it, unlike standard conjectures.     

FIRM COMPLIANCE WITH SOCIAL INSURANCE OBLIGATIONS WHERE THERE IS A WEAK SURVEILLANCE AND ENFORCEMENT MECHANISM: EMPIRICAL EVIDENCE FROM SHANGHAI*

Abstract. This article examines why firms in Shanghai comply or over‐comply with social insurance obligations in a regulatory environment where the expected punishment for non‐compliance is low. Our first finding is that firms found to be in non‐compliance in the first audit in 2001 were moved into a separate violation category and the probability of being reaudited in 2002 was significantly higher if the firm was in that category. Our second main result is that, across the board, firms which were reaudited continued to underpay in 2002 but the extent of underpayment was significantly reduced.     

Growth in India’s Service Sector: Implications of Structural Breaks

The paper is an attempt to identify the multiple structural breaks in India’s GDP, as well as its main growth enhancing sector i.e., services and its components and subsequently calculate the growth rate in different regimes. The paper uses the Bai-Perron (Econom 66(1), 1998, J Appl Econom 18(1), 2003) methodology of estimating multiple endogenous structural breaks (both pure and partial) in India’s service sector and its components and GDP during 1950–2010. Further, the paper uses the Boyce (Oxf Bull Econ Stat 48:385–391, 1986) methodology of estimating kinked exponential model of the growth rate, and further uses the Banerjee, Lumsdaine and Stock (J Business Econ Stat 10:271–287, 1992) test and the Lumsdaine and Pappel (Rev Econ Stat 79:212–218, 1997) test to check for the stationarity in the presence of structural breaks. The data used in this paper are the components of subsectors of services GDP and GDP at factor cost (with 2004–2005 as base). It is found that there is very little difference between the estimation of pure and partial structural break dates in India’s services GDP and its subsectors and four such breaks have been identified with help of Bai-Perron (Econom 66(1), 1998, J Appl Econom 18(1), 2003) methodology. The Boyce methodology of estimation of growth rates finds that mainly in the third and fourth regimes, the growth rates are highest in the subsectoral as well as at the aggregate levels of services GDP. The Banerjee, Lumsdaine and Stock test (J Business Econ Stat 10:271–287, 1992) and the extended Lumsdaine and Pappel test (Rev Econ Stat 79:212–218, 1997) cannot negate the presence of unit root in the data, irrespective of the presence of multiple structural breaks. The paper concludes with the identification of four broad regimes of growth of India’s services GDP and in the subsectors with possible explanations thereof.

     

Intra‐household bargaining power and household expenditure allocation: Evidence from Iran

This article examines the role of intra‐household bargaining power on household expenditure patterns in Iran to see whether women’s empowerment can achieve similar results in Iran as we have seen it achieve in other countries of the world. This study is insightful because it tells us whether Iranian women, who have experienced both economic and noneconomic constraints over many years, can utilize increased power toward economic development. The bargaining power is measured by the sex ratio in the marriage market. Using the Household Income and Expenditure Survey in Iran, we find that greater bargaining power of women contributes significantly toward greater provision of education and health expenditure within the household, creating a potential for an increase in welfare for the next generation.     

Scope of improvement in water usage efficiency in manual dishwashing: A multicountry study by questionnaire survey

Over recent decades, water conservation have become increasingly an utmost important issue for debate, and this includes the domestic sector. Reducing demand water by improving the efficiency of water use in domestic sector requires an understanding of how water is used and in what ways water savings can be realized. The focus of this global, web‐based, consumer questionnaire survey was to analyze individual consumer attitudes towards using water in manual dishwashing and understand the likelihood of a prospect of changing the daily manual dishwashing method resulting to a more efficient domestic usage of water. This study was designed to investigate the manual dishwashing technique used in the 5249 households of nine different countries ‐ China, Germany, Italy, Russia, Indonesia, Brazil, India, South Africa and Argentina. Besides socio‐demographics, technical questions like cleaning steps, hygiene questions motivational question, environmental awareness questions, questions on payment for water and electricity, questions on information sources about household work were included in the study. It was found that the awareness to conserve water was common among the Asian participants but it necessarily was not practiced in the households as individual washing of dishes was found to be quite high. Among the many outcomes, important one was that ‘running tap method’ was found to be most prevalent (86%) among Russian participants, complimenting their detached approach towards conserving domestic water usage. In South American countries like Brazil (66%) and Argentina (51%), high occurrence of ‘running tap rinse’ was found to be a common practice, confirming the lack of conscious use of water in manual dishwashing in the subcontinent. Based on the overall responses, awareness of a new and efficient technique of manual dishwashing could be propagated through the most voted mediums of Internet (81%) and TV (69%).     

Microcredit Programme Participation and Household Food Security in Rural Bangladesh

Lack of access to credit prevents poor households in developing countries from diversifying into income‐generating activities that could safeguard them against unforeseen shocks and seasonality, leaving them susceptible to food deprivation, even when aggregate food supplies are adequate. Microcredit programmes help these households to access financial capital that could help improve their food security situation. We examine how microcredit affects different measures of food security; namely, household calorie availability, dietary diversity indicators and anthropometric status of women of reproductive age (15–49 years) and children under the age of 5 years. We find that microcredit programme participation increases calorie availability both at the intensive and extensive margins, but does not improve dietary diversity and only has mixed effects on the anthropometric measures. We also find that the effect of microcredit participation on food security may be non‐linear in which participation initially has either no effect on food security or may actually worsen it, before improving it in the longer run. Our results help to explain why existing short‐term evaluations of microcredit sometimes do not show any positive effects.     

Determinants of Nominal Interest Rates in India

Journal of Quantitative Economics - This paper examines the role of monetary factors in the variation of nominal interest rates in India for the deregulated regime of interest rates and the...