Asis Kumar Banerjee: Measuring Development: An Inequality Dominance Approach

Journal of Quantitative Economics -     

Bilateral trade between India and Bangladesh: A general equilibrium approach

India and Bangladesh have pursued policies of trade liberalization since the early 1990s. However, owing to the differential speeds of opening up, Bangladesh's bilateral trade deficit with India widened substantially over the years. This aggravated the economic and the political tensions between the economies. It has been held that promotion of free trade between the two economies may enhance the trade and hence economic cooperation between them. Against this backdrop the present paper proposes a theoretical framework that provides a general equilibrium determination of the commodity pattern of trade and hence locates the comparative advantages of the economies. The empirical implementation of the model considers trade in 25 sectors comparable in the input–output tables of the economies. The study isolates the gains from free trade accruing to either economy. The paper also explores the pattern of bilateral trade when each economy produces goods by utilizing their own as well as the other country's technology. The gains from this trading arrangement are also isolated.     

Timing of decisions and the competitive firm under input price uncertainty

This paper studies the behavior of a competitive firm faced with input price uncertainty when the ex ante decision variable is output, not the quantities of the inputs. Highly unconventional results are obtained about the effects of uncertainty and of marginal increases in risk.     

Targets and Resources: A Screening Perspective

To secure funding for a project, an agent (informed about the project's type) announces a target output. The principal provides more generous resources for high targets but makes compensation tied to performance relative to the projection. The incentive mechanism is geared towards screening project/agent types for resource disbursement at the ex‐ante stage and motivating appropriate efforts at the interim stage. These dual objectives are embedded in an optimal share contract solution: a pair of startup funds and output share between the principal and agent. The target mechanism's performance is then assessed with respect to implementation of the optimal share contract solution. The focus is on linear contracts for their applicability and practical relevance. Copyright © 2016 John Wiley & Sons, Ltd.     

Strategic Environmental Policy under Free Trade with Transboundary Pollution

We analyze the effects of trade liberalization on environmental policies in a strategic setting when there is transboundary pollution. Trade liberalization can result in a race to the bottom in environmental taxes, which makes both countries worse off. This is not due to the terms of trade motive, but rather the incentive, in a strategic setting, to reduce the incidence of transboundary pollution. With command and control policies (emission quotas), countries are unable to influence foreign emissions by strategic choice of domestic policy; hence, there is no race to the bottom. However, with internationally tradable quotas, unless pollution is a pure global public bad, there is a race to the bottom in environmental policy. Under free trade, internationally nontradable quotas result in the lowest pollution level and strictly welfare‐dominate taxes. The ordering of internationally tradable quotas and pollution taxes depends, among other things, on the degree of international pollution spillovers.