New Series / Volume 9, No. 2 /
Old Series/ Volume 25, No. 2/ July, 2009
- Front Page and CONTENTS:
- A Tribute to Professor Suresh Tendulkar
- Determinants of Export Decision of Indian Firms: A Primary Data Analysis
- Contemporary Relevance and Ongoing Controversies Related to the CES Production Function
- Businesses Risks Aggregation with Copula
- Estimating Structural Breaks Endogenously in India's Post-Independence Growth Path: An Empirical Critique
- Bayes and Empirical Bayes Estimators with Their Unique Simpler Forms and Their Superiorities over BLUE in Two Seemingly Unrelated Regressions
- Inter-regional Poverty Comparisons: Case of West Bengal
- Demand and Supply of Currencies of Small Denominations: A Theoretical Framework
- Product Market Competition and Capital Structure of Firms: The Indian Evidence
- Valuing Recreational and Conservational Benefits of a Natural Tourist Site: Case of Cherrapunjee
- Dilip M. Nachane (Ed.) "India Development Report 2011," Oxford University Press, New Delhi: Review By Vikas Chitre
- D. Jayaraj and S. Subramanian "Poverty, Inequality and Population: Essays in Development and Applied measurement," Oxford University Press, New Delhi: Review By Sripad Motiram
Author(s): T.A. Bhavani
Author(s): T.N. Srinivasan and Vani Archana
Abstract: This paper reports the findings from a purposive survey of 400 firms across different regions in India and in selected industry segments. It analyses the factors determining firms' decision to export and their performance, in particular, the role of infrastructure constraints and internal costs. These include physical, financial and human infrastructure; trade costs, tariffs, institutional factors such as conflict resolution, political stability, corruption, anti-competitive practices, macroeconomic policy, labour regulation, and intensity of competition, etc. The findings of this paper are relevant to the broader debate on Indian economic development. From a policy perspective the paper contributes to an exploration of the relative importance of infrastructure constraints and domestic costs on exports. It emphasizes the distinctive features of India's past path of development and suggests its possible future course of action.
Author(s): T.V.S.Ramamohan Rao
Abstract: The CES specification has been an important watershed in the development of the production function and its applications over the past fifty years. While the original formulation and estimation were rooted in sound economic theory many issues have been unresolved. In particular, the economic sources of the elasticity of substitution and the meaning of the ``returns to scale'' parameter remained ambiguous. Similarly, the efficient method of estimating the elasticity of substitution is as yet not clear. The primary reason is that several proposed methods of estimating the non-linear CES function did not pay attention to the economic decision processes underlying the observed choices from which estimation begins. Despite these shortcomings substitution and its applications have been so important that a whole lot of applications have been conceptualized. Several important insights have been recorded from the empirical work. However, it was found that the elasticity of substitution concept must be supplemented, or supplanted altogether, by several other explanations, equally rooted in economic theory and well documented empirical regularities, to provide a complete understanding of empirical phenomena. We may need many more years to finally decide which of the developments are worthwhile and which ones deserve discarding. It may take another genius of the stature of Minhas to steer the research out its current turbulence.
Author(s): J. Sadefo Kamdem
Abstract: This paper provides explicit expression for the lower bound and the upper bound of the overall VaR of a portfolio of business units when the joint risks factors of each business unit follows a mixture of multivariate elliptic distributions with dynamic conditional correlation matrix. We use copula to measure the dependence between the profits and losses (P&Ls) of different business units in the portfolio.
Author(s): Ravindra H Dholakia and Amey A Sapre
Abstract: This paper attempts to address empirical and methodological issues with regard to endogenous estimation of break dates in India's GDP and sub-sector series and finds that detection of break dates is sensitive to base year changes, marginal extension of time series and alteration of the length of the partition. The study uses series of Indian GDP and sub-sectors at two different base years to evaluate its effect on variation in break dates. To take into account the effect of marginal increase of time series, break dates are estimated on time series from 1950-51 to 2003-04 and 2008-09. The study also raises the issue about selection of the length of partition, which can affect detection of break dates. These empirical limitations do not lead to any conclusive evidence of break dates and hence cannot help settle the debates over different growth and policy regimes of the Indian economy.
Author(s): Radhey S. Singh and Lichun Wang
Abstract: This paper considers Bayes and empirical Bayes estimation of the regression parameters in a system of two seemingly unrelated regression (SUR) models with Gaussian disturbances. Employing the covariance-adjusted technique, we obtain a sequence of Bayes estimators and show that this is the best Bayes estimator (BE) in the sense of having least covariance matrix. We establish the superiority of this best BE over the best linear unbiased estimator (BLUE) in terms of the mean square error matrix (MSEM) criterion. When the covariance matrix of disturbances is unknown, we obtain a sequence of corresponding empirical Bayes (EB) estimators and show that this too is superior to BLUE in MSEM criterion. In addition, we establish an interesting fact which shows that both Bayes and empirical Bayes estimators have only unique simpler forms, which too are superior to BLUE, and further allow us to study them in more details. This paper shows that the proposed Bayes and EB estimators, which combine the Bayesian method with the covariance-adjusted technique, are very efficient even for small sample size. Finally, we generalize our results to the system of two SURs with unequal numbers of observations and to the system of more than two SURs.
Author(s): Somnath Chattopadhyay
Abstract: This paper aims to explore into the causes of the differential levels of economic well being in the two parts of West Bengal, an eastern state of India in terms of incidences of poverty and various socio economic explanatory variables. Using a regression based technique, the incidences of poverty are found separately for these two parts, i.e., North Bengal and South Bengal. The disparity in poverty estimates (in particular, the Head Count Ratio (HCR) between rural North and South Bengal is studied. The difference between the poverty estimates is then decomposed into a characteristics effect, showing the effect of the regional characteristics and a coefficients effect, showing the effects of the differential impact of the characteristics over the regions using the familiar Oaxaca decomposition method and the results are interpreted in terms of policy prescriptions.
Author(s): Kaushik Bhattacharya
Abstract: Economic history reveals that different countries over different time periods suffered from severe shortage of currencies of small denominations. Due to the frequency and severity of these incidents, first Cipolla (1956) and later Sargent and Velde (2002) named this phenomenon as ``the big problem of small change''. The paper presents a theoretical framework to understand ``the big problem of small change''. It specifies demand and supply equations of currencies of small denominations. Both demand and supply equations emerge out of an optimization framework. Demand functions for small denominations are obtained from a linear expenditure system. Our main contention is that economic agents would like to hold a fixed number of small changes, independent of their respective total cash holdings. However, in our model the fixed quantity is influenced by the probability that in a currency transaction, the counterparty would be able to provide the small change if needed. The supply function is derived from an optimization problem where the central bank balances its operational cost with the probability that an individual would be able to carry out ``small'' transactions independently, without the help of counterparty. In this demand-supply framework, the probability that a randomly chosen individual in an economy would hold certain currency combinations is interpreted as ``price''. We attempt to show that in a dynamic environment, such interaction could be understood by specifying a cob-web type model where expectations are formed based on previous period's experience. As an operational rule, it is proposed that the central bank should increase the supply of small denominations at a rate marginally above the growth rate of economically active population and stop minting as soon as some of the small denominations start return in the currency chest. We also suggest how demand for ``small change'' could be estimated from the ``lifetime'' of the ``smallest'' denomination.
Author(s): Sumitra Naha and Malabika Roy
Abstract: The present study intends to analyze empirically to what extent product market competition that a firm faces in a developing country like India, affects its capital structure decisions. The product market behaviour is captured from three different angles viz. structure-conduct-performance. We examine the impact of market structure, conduct and performance on both the short-term and long-term debt ratios separately, after controlling for the other determinants of capital structure. A new feature of the study is to underscore the role of economic liberalization in this respect. The method used is panel regression analysis. It is observed that the structure and conduct is significant in influencing only the short-term debt ratio whereas performance is consistently having a negative impact on both short-term and long-term debt ratios. The structural break dummy is also significant irrespective of the maturity structure of debt.
Author(s): Utpal Kumar De and Amrita Devi
Abstract: Nature based tourism has been a very important source of income and employment in Meghalaya as the state is endowed with diverse scenic natural beauty that attracts a large number of domestic and foreign tourists every year. This paper attempts to examine the impact of various social, economic and locational factors on the visiting decision of the tourists to Cherrapunjee, the wettest place on the earth. The recreation benefit enjoyed by the visitors, from the natural beauty of the site is estimated by using both the revealed and stated willingness to pay i.e., Travel Cost method (TCM) and people's willingness to pay for the preservation and improvement of the area through Contingent Valuation technique (CVM). Distance travelled and travel cost incurred by the visitors is found to have significantly negative impacts on the frequency of visit while income, education has significantly positive impact on the same. The estimated recreation benefits obtained from revealed and expressed WTP for the preservation and improvement of the site is in favour of policy induced increase of recreation charges in the site.