ESTIMATING SPATIAL CONSUMER PRICE INDICES THROUGH ENGEL CURVE ANALYSIS

In this paper we propose a method of estimating spatial multilateral price index numbers from cross‐section consumer expenditure data on different items using Engel curve analysis. The novelty of the procedure is that it overcomes the problem of data inadequacy, a problem that is shared by most of the developing countries. The procedure does not require item‐specific price/unit value data and price index numbers can be calculated from consumer expenditure data grouped by per capita income/total consumer expenditure class in a situation where unit level data are not available. To illustrate the method, we use published state‐specific data of the 50th round (1993–94) and 55th round (1999–2000) consumer expenditure surveys of India's National Sample Survey Organization (NSSO) and calculate the spatial consumer price index numbers for 15 major states of India, with All‐India taken as base, separately for the rural and the urban sector for each round.     

DEMAND THRESHOLD,ZERO EXPENDITURE AND HIERARCHICAL MODEL OF CONSUMER DEMAND

Consumer expenditure surveys often show households reporting zero consumption of some commodities. Three reasons for this are recognized in the literature: (i) infrequency of purchase, (ii) a strong brand preference for differentiated products and (iii) misreporting. However, sometimes the number of households reporting zero consumption is seen to decline with income. To capture this phenomenon, which does not fall into any of the categories mentioned above, we propose a hierarchical preference structure and identify a class of recursive utility functions representing this structure. An empirical illustration based on Indian consumer expenditure data is provided.     

A TREATMENT OF ABSOLUTE INDICES OF POLARIZATION*

Absolute polarization indices remain unchanged under equal absolute augmentation in all incomes. This paper identifies the class of absolute polarization indices whose orderings of alternative income distributions agree with the rankings generated by nonintersecting absolute polarization curves. We explore the possibility of using the Kolm (1976) – Blackorby‐Donaldson (1980) ethical absolute inequality index in polarization measurement. We establish that although inequality and polarization are dissimilar concepts, different absolute inequality indices can be employed to design alternative absolute polarization indices. A numerical illustration is provided using Indian data and it is shown that inequality and polarization are different issues in income distribution analysis.     

India's Global Trade Potential: The Gravity Model Approach

Abstract

In this article an augmented gravity model equation has been used to analyze the world trade flows using a sample of 146 countries. The coefficients thus obtained are then used to predict trade potential for India. Ordinary Least Squares with cross-section data for the year 2000 have been used for estimation. The results show that all three traditional “gravity” effects are intuitively reasonable, with statistically significant t-statistic often exceeding 50 in absolute value. Alternative measures of gross national product (GNP) dollar value and purchasing power parity do not alter either the sign or significance of different explanatory variables. Historical and cultural similarities also impact positively upon bilateral trade. As concerns India's trade potential, the model shows that there is tremendous potential with China and trade can more than double if barriers and constraints are removed. Our estimates also indicate a huge potential, of the order of US$6.5 billion, with Pakistan.     

Estimating Purchasing Power Parities from Household Expenditure Data Using Complete Demand Systems with Application to Living Standards Comparison: India and Vietnam

This study departs from the previous literature on purchasing power parity (PPP) by proposing a demand system based methodology for calculating the PPP that takes account of consumer preferences and allows for the substitution effect of price changes. The methodology is used to calculate the PPP between the Indian Rupee and the Vietnamese Dong. The study allows for regional variation in preferences and price changes both inside the country and between countries. It proposes and applies a methodology for constructing prices from unit values after adjusting them for quality and demographic effects. The adjusted unit values are used as prices in the demand estimations, and the demand parameter estimates are used to calculate both spatial prices within each country and the PPP between the two countries within a consistent framework. The study illustrates the usefulness of preference consistent methods to calculate the PPP by applying the PPPs to compare living standards between India and Vietnam. The significance of the results follows from the fact that the levels of living comparisons are quite sensitive to the PPP used in converting the Rupee expenditure into Vietnamese Dong. The present results on food PPPs question the relevance of the PPPs from the ICP project in cross‐country welfare comparisons especially in a period of high food inflation.     

Gender Bias in Education in West Bengal

This paper attempts to capture gender bias at two different levels of education, namely, below class-10 and above class-10 using NSSO 64th round education expenditure data on West Bengal. The analysis for the below class-10 level involves an intra household framework and Heckman’s two step model. Further, for this section the analysis is split up into classes 1–8 and classes 9–10 in view of the Right to Education act (2005). For above class-10 level, gender bias has been captured through a multinomial logit model for selection of subjects across households.

     

Inter-firm scalar linkage in India: A class within the small scale industry

Along with the growing industrial sector, functional complementarity between large and small scale enterprises has become a widely prevalent phenomenon. Expanding the base of the industrial production leads to division of processes where large and small scale units operate as complementary to each other. Such complementarity and division of labour between the different sized units results into cost minimization, and acceleration in growth of the manufacturing sector.However the extent and the pattern of functional complementarity (between large and small scale enterprises) is likely to be conditioned by market as well as institutional factors. Therefore, in order to examine the impact of interscale complementarity in terms of growth as well as of distribution of gains across large and small scale enterprises it is very important to learn about the nature of interfirm linkages and the process through which linkages get established. It is in this context, the present paper furnishes details based on a case study of Textile Machinery Parts Manufacturing (TMP) industry in a metropolitan city (Ahmedabad). The industry represented is constituted by a large number of small scale firms that are engaged in fabricating replacement parts for the users of machinery equipments (i.e. Textile Mills) who operate on a large scale. Owing to wide range of products, and in case of some parts higher frequency of replacement, the TMP industry, at least till recently, has sustained a large number of small firms.The major findings of the analysis are: (i) The incidence of inter-firm linkages is limited to about a third of the small scale firms; (ii) Among various forms of linkages the marketing linkages are the most predominant (iii) The linkage relationship has been a positive factor in determining the performance of the small scale firms; (iv) Personal contacts play an important role in inter-firm linkages, thus benefits of linkage relationship are mainly confined to a small social-group of industrialists; (v) While the small scale suppliers operate under a highly competitive market, the buyers often enjoy oligopsonist's advantage; hence the gains of competitive efficiency tend to favour the large scale sector.     

Efficiency of independence working analysis of correlated survival data with general cluster size

We consider estimation of the regression coefficients in the multivariate positive stable frailty model with Weibull marginals introduced by Hougaard (1986) . For general cluster sizes and various covariate patterns, we study the efficiency, relative to full maximum likelihood, of estimation from the independence working model and from the fixed effects model.     

Distribution of personal income: Development of a new model and its application to U.S. income data

This paper proposes a four-parameter statistical model of the personalized distribution of income using the ‘income share elasticity’ approach suggested by Esteban (1986). Our proposed model includes the Singh–Maddala (1976) and Dagum (1977) distributions as special cases. The generalized beta II distribution of McDonald (1984) is also a variant of this model. It appears to give an excellent fit to US income data and its empirical performance turns out to be superior to those of the Singh–Maddala (1976), Dagum (1977), the five-parameter Champernowne (1953) distributions and the generalized beta II distribution of McDonald (1984) on some data.