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Indian Growth and Development Review

2008 - 2014

Current editor(s): Professor Satya P Das and Professor Chetan Ghate

from Emerald Group Publishing
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Volume 7, issue 2, 2014

Optimal tax and expenditure policy in the presence of emigration: Are credit restrictions important? Abstract Purpose–This paper aims to present a theoretical underpinning for the fact that empirical studies have found an inverted-U curve relationship between emigration and per capita income, based on credit restrictions. The implications for tax policy are also analyzed. Design/methodology/approach–Using an intertemporal general equilibrium model, the authors characterize how the presence of an “inverted U-curve” relationship between emigration and per capita income will influence the optimal tax and expenditure policy in a country where agents have the option to move abroad. Findings–Among the results it is shown that if age-dependent taxes are available, the presence of an inverted-U curve provides an incentive to tax young labor harder, but old labor less hard, than otherwise. Originality/value–This migration model fits the empirical facts of migration better than most of the migration models previously used in the optimal taxation literature pp. 98-117 Downloads
Kenneth Backlund;Tomas Sjögren;Jesper Stage;
Banking the unbanked: the Mzansi intervention in South Africa Abstract Purpose–This paper aims to understand household’s latent behaviour decision-making in accessing financial services. In this analysis, the determinants of the choice of the pre-entry Mzansi account by consumers in South Africa is looked at. Design/methodology/approach–In this study, 102 variables, grouped in the following categories: basic literacy, understanding financial terms, targets for financial advice, desired financial education and financial perception. Using a computationally efficient variable selection algorithm, variables that can satisfactorily explain the choice of a Mzansi account were studied. Findings–The Mzansi intervention is appealing to individuals with basic but insufficient financial education. Aspirations seem to be very influential in revealing the choice of financial services, and, to this end, Mzansi is perceived as a pre-entry account not meeting the aspirations of individuals aiming to climb up the financial services ladder. It was found that Mzansi holders view the account mainly as a vehicle for receiving payments, but, on the other hand, are debt-averse and inclined to save. Hence, although there is at present no concrete evidence that the Mzansi intervention increases access to finance via diversification (i.e. by recruiting customers into higher-level accounts and services), this analysis shows that this is very likely to be the case. Originality/value–The issue of demand-side constraints on access to finance have been largely been ignored in the theoretical and empirical literature. This paper undertakes some preliminary steps in addressing this gap pp. 118-141 Downloads
Philip Kostov;Thankom Arun; Samuel Annim
Does money matter in Africa?: New empirics on long- and short-run effects of monetary policy on output and prices Abstract Purpose–The purpose of this paper is to examine the effects of monetary policy on economic activity using a plethora of hitherto unemployed financial dynamics in inflation-chaotic African countries for the period of 1987-2010.Although in developed economies, changes in monetary policy affect real economic activity in the short-run, but only prices in the long-run, the question of whether these tendencies apply to developing countries remains open to debate. Design/methodology/approach–Vector autoregresion (VARs) within the frameworks of Vector Error Correction Models and simple Granger causality models are used to estimate the long- and short-run effects, respectively. A battery of robustness checks are also used to ensure consistency in the specifications and results. Findings–The tested hypotheses are valid under monetary policy independence and dependence, except few exceptions. H1: Monetary policy variables affect prices in the long-run but not in the short-run. For the first-half (long-run dimension) of the hypothesis, permanent changes in monetary policy variables (depth, efficiency, activity and size) affect permanent variations in prices in the long-term. But in cases of disequilibriums, only financial dynamic fundamentals of depth and size significantly adjust inflation to the cointegration relations. With respect to the second-half (short-run view) of the hypothesis, monetary policy does not overwhelmingly affect prices in the short-term. Hence, but for a thin exception, H1 is valid. H2: Monetary policy variables influence output in the short-term but not in the long-term. With regard to the short-term dimension of the hypothesis, only financial dynamics of depth and size affect real gross domestic product output in the short-run. As concerns the long-run dimension, the neutrality of monetary policy has been confirmed. Hence, the hypothesis is also broadly valid. Practical implications–A wide range of policy implications are discussed. Inter alia: the long-run neutrality of money and business cycles, credit expansions and inflationary tendencies, inflation targeting and monetary policy independence implications. Country-/regional-specific implications, the manner in which the findings reconcile the ongoing debate, measures for fighting surplus liquidity and caveats and future research directions are also discussed. Originality/value–By using a plethora of hitherto unemployed financial dynamics (that broadly reflect monetary policy), we provide significant contributions to the empirics of money. The conclusion of the analysis is a valuable contribution to the scholarly and policy debate on how money matters as an instrument of economic activity in developing countries pp. 142-180 Downloads
Simplice Asongu
Targeting, cascading and indirect tax design Abstract Purpose – The purpose of this paper is to address two fundamental issues in indirect tax design. It first revisits the case for reduced rates on items especially important to the poor, and then explores the welfare costs from cascading taxes. Design/methodology/approach – Applied theory was used in this paper. Findings – On the first issue, the paper establishes conditions under which even very crudely targeted spending measures better serve the interests of the poor than does the reduced taxation of particular commodities looming large in their consumption. On the second, it shows that these may actually be lower the wider the set of inputs that are taxed but, more to the point, may plausibly be large even at a low nominal tax rate and with relatively few stages of production: contrary to a common mantra, “a low rate on a broad base” is not always good policy. Originality/value – Both issues addressed in the paper are recurrent and central concerns in the design of indirect taxes in general, and the value-added tax (VAT)/general sales tax (GST) in particular. The author is unaware of other treatments that are at all comparable in perspective or results. The author hopes the analysis will prove useful in many contexts where these issues arise – not least in India, where these issues are central to discussions of VAT/GST reform pp. 181-201 Downloads
Michael Keen
Poverty by social, religious and economic groups in India and its largest states: 1993-1994 to 2011-2012 Abstract Purpose – The purpose of this paper is to ground in serious empirical evidence the debate on whether the post-reform acceleration in growth has helped bring poverty down for all economic, social and religious groups and in all state or has left certain groups or states. Design/methodology/approach – The paper uses unit-level data from the so-called thick rounds of expenditure surveys by National Sample Survey (NSS) in the years 1993-1994, 2004-2005, 2009-2010 and 2011-2012 and estimates the proportion of the population below the official Tendulkar line. Adequate care is taken to address the issue of sample size in reporting the estimates. Findings–Whether we slice the data by social, religious or economic groups, by states or by rural and urban areas, poverty has significantly declined between 1993-1994 and 2011-2012 with a substantial acceleration during the faster-growth period from 2004-2005 to 2011-2012. Poverty rates among the disadvantaged social groups and minorities have declined faster so that the gap in poverty rates between them and the general population has declined. In 7 of the 16 states with large Muslim populations, the poverty rate for them is now below that for the Hindus. Research limitations/implications–Use of survey data has its limitations, especially when the sample sizes are small. The paper also does not assess the direct contribution of growth in relation to that through redistribution. Practical implications–The paper presents implications for identification of the poor for the purpose of designing targeted interventions. Originality/value–This is the first paper to offer up-to-date estimates of poverty by social, religious and economic groups, by states and by rural and urban areas pp. 202-230 Downloads
Arvind Panagariya and Vishal More

Volume 7, issue 1, 2014

Comparative corruption in China and India Abstract Purpose – This paper aims to explore the difference in the extent and nature of corruption in China and India. Design/methodology/approach – The paper takes a comparative political-economy approach. Findings – The paper shows the complexities in the different style and substance of governance in the two countries that are not captured in the usual democracy-authoritarianism comparisons. Originality/value – The interesting contrasts highlight differences in style and content of governance in China and India, which are not captured in the usual facile democracy-authoritarianism comparisons pp. 8-11 Downloads
Pranab K. Bardhan
Accountability of local and state governments in India: an overview of recent research Abstract Purpose – This paper aims to provide an overview of recent research on accountability of local and state governments in India. Design/methodology/approach – The Downsian theory of electoral competition is used as a departure point for classifying different sources of government accountability failures. Subsequent sections deal with each of these sources in turn: limited voter participation and awareness; ideology, honesty and competence of political parties and electoral candidates; capture by elites; clientelism and vote-buying. Each section starts by explaining the relevant departure from the Downsian framework and then reviews available empirical evidence in the Indian context for each of these possible “distortions”, besides effects of related policy interventions. The final section summarizes the lessons learnt, and the fresh questions that they raise. Findings – The paper describes a range of possible reasons that limit the effectiveness of elections as a mechanism inducing governments to be accountable to their citizens and reviews the evidence available from the Indian context concerning each of these. Originality/value – The contribution of the paper is to provide an overview and perspective of recent literature on political economy problems affecting performance of state and local governments in India pp. 12-41 Downloads
Dilip Mookherjee
Perceived corruption frequency and size of corruption in economies Abstract Purpose – The paper aims to develop a theoretical model to explain the exact process through which the scale effect works to create a possible wedge between a perception-based ranking like the “Corruption Perception Index (CPI) ” and the axiomatic “absolute costs of corruption”-based ranking of economies with low enforcement against corruption. Design/methodology/approach – The paper takes into account corruption both at the “high” and “low” levels of bureaucracies, where the bribes are paid sequentially at the two levels. The bribes are endogenously determined at the equilibrium using a sequential game approach. Findings – The paper finds that in the absence of coalition between the two levels of bureaucrats, both the absolute level of corruption and the welfare level of the economies are expected to vary inversely with the perceived corruption frequency. The paper also explores the possibility of a stable coalition between the “high” and “low” level bureaucrats and shows that with the perception of a stable coalition being formed, the negative monotonic relation between the corruption frequency and the absolute size of corruption breaks down. Originality/value – First, the paper argues that the ranking of the economies with low enforcement against corruption on the basis of perceived corruption frequency may not reflect the ranking of the economies according to their absolute size of corruption; it points out that the perceived higher corruption frequency in an economy as reflected in CPI can be an indicator of both the lower size of “high” level corruption and absolute size of corruption in the economy. Particularly, this happens in economies where coalition between the “high” and “low” level officials does not form. Second, it identifies the exact way in which the scale effect works to create a difference in the CPI ranking and the axiomatic “absolute costs of corruption”-based ranking and explains why similar difference would exist if “absolute costs of corruption”-based ranking is derived from all the sources of hard data on corruption. Third, it explains why a stable coalition between the “high” and “low” level bureaucrats in economies with low enforcement does not usually form pp. 42-60 Downloads
Vivekananda Mukherjee, Department of Economics, Jadavpur University, Kolkata, India and Aparajita Roy, Department of Economics, Jadavpur University, Kolkata, India
Bribery in subsidized credit markets: evidence from Bangladesh Abstract Purpose – The aim of this paper is to study the role of bribery in subsidized credit markets in developing countries. First, the authors use the data to test whether more productive borrowers will pay larger or smaller bribes since the theoretical literature offers conflicting findings regarding the relationship between the size of the bribe and the productivity of borrowers. Second, the authors test whether being eligible to borrow from a microfinance institution affects the frequency or the magnitude of the bribe paid when borrowing from a (non-microfinance) subsidized bank. Design/methodology/approach – The empirical analysis is based on existing theoretical models of bribery. The data set uses publicly available survey data from the Bangladesh Institute for Development Studies. The primary linear model is estimated using OLS. Because left-censoring affects the data, the authors also estimate a Tobit model. Finally, to correct for potential selection bias, the authors also estimate a Heckman selection model. Findings – The authors find that more productive borrowers pay lower bribes than less productive borrowers and that being MFI-eligible affects the frequency of bribery, but not the magnitude of the bribe. Originality/value – To the authors' knowledge, the paper is the first empirical study of bribery in subsidized credit markets pp. 61-72 Downloads
Emmanuel Dechenaux, Aaron Lowen and Andrew Samuel
Crime, corruption and the role of institutions Abstract Purpose – There have been very few attempts in the economics literature to empirically study the link between criminal and corrupt behaviour due to lack of data sets on simultaneous information on both types of illegitimate activities. The paper aims to discuss these issues. Design/methodology/approach – The present study uses a large cross-country data set containing individual responses to questions on crime and corruption along with information on the respondents' characteristics. These micro-level data are supplemented by country-level macro and institutional indicators. A methodological contribution of this study is the estimation of an ordered probit model based on outcomes defined as combinations of crime and bribe victimisation. Findings – The authors find that: a crime victim is more likely to face bribe demands, males are more likely victims of corruption while females are of serious crime, older individuals and those living in the smaller towns are less exposed to crime and corruption, increasing levels of income and education increase the likelihood of crime and bribe victimisation to be reported and a stronger legal system and a happier society reduce both crime and corruption. However, the authors find no evidence of a strong and uniformly negative impact of either crime or corruption on a country's growth rate. Originality/value – This paper is, to the authors' knowledge, the first in the literature to explore the nexus between crime and corruption, their magnitudes, determinants and their effects on growth rates pp. 73-95 Downloads
Ishita Chatterjee and Ranjan Ray

Volume 6, issue 2, 2013

An analysis of price interventions in an era of reform reversal pp. 164 - 194 Downloads
Priyodorshi Banerjee
Temporal comparisons of prices, expenditure and growth in India: a state-wise analysis pp. 195 - 211 Downloads
Amita Majumder, Ranjan Ray and Kompal Sinha
What explains the high capital intensity of Indian manufacturing? pp. 212 - 241 Downloads
Rana Hasan, Devashish Mitra and Asha Sundaram
Graduating to globalisation: a study of Southern multinationals pp. 242 - 259 Downloads
Dilek Demirbas, Ila Patnaik and Ajay Shah
Direct and dual elasticities of substitution under non-homogenous technology and nonparametric distribution pp. 260 - 288 Downloads
Kusum Mundra
Policy Focus: Does a better business environment stimulate corporate investment in India? pp. 289 - 305 Downloads
Kiichi Tokuoka
Book Review: Modern Growth Theory pp. 306 - 311 Downloads
Olivier Cardi

Volume 6, issue 1, 2013

External liberalization by India and China: recent experience and future challenges pp. 8-34 Downloads
Arvind Panagariya and Asha Sundaram
Exports of services: Indian experience in perspective pp. 35-60 Downloads
Barry Eichengreen and Poonam Gupta
Trade productivity upgrading, trade fragmentation, and FDI in manufacturing: The Asian development experience pp. 61-87 Downloads
Jesse Mora and Nirvikar Singh
International trade and inclusive growth: a primer pp. 88-112 Downloads
Daniel Lederman
Trade liberalization and wage inequality in India: a mandated wage equation approach pp. 113-127 Downloads
Prachi Mishra and Deb Kusum Das
Globalization and inequality: insights from municipal level data in Brazil pp. 128-147 Downloads
Yiagadeesen Samy and Jean Daudelin
Do WTO members employ less child labour? pp. 148-159 Downloads
Eugene Beaulieu and Debayan Pakrashi
2012 Awards for Excellence pp. 159-160 Downloads
Emerald Group Publishing
Globalization and developing countries: introduction pp. 161-162 Downloads
Devashish Mitra and Priya Ranjan

Volume 5, issue 2, 2012

Public expenditure choices and gender quotas pp. 108-130 Downloads
Indira Rajaraman and Manish Gupta
Foreign firms, Indian multinationals and spillovers in the Indian pharmaceutical industry pp. 131-150 Downloads
Chidambaran G. Iyer
Causality between wholesale price and consumer price indices in India: An empirical investigation in the frequency domain pp. 151-172 Downloads
Aviral Tiwari
Policy Focus: Global production sharing and South-South trade pp. 173-202 Downloads
Prema-chandra Athukorala and Shahbaz Nasir
Education Briefing: Evolutionary game theory: an exposition pp. 203-213 Downloads
Ratul Lahkar

Volume 5, issue 1, 2012

Education spillovers: empirical evidence in rural India pp. 4-24 Downloads
Véronique Gille
A time-varying parameter model of inflation in India pp. 25-50 Downloads
Sudhanshu Kumar, Naveen Srinivasan and M Ramachandran
Deciphering the Hindu growth epic pp. 51-69 Downloads
Peter Robertson
Policy focus: Monetary policy in an uncertain world: probability models and the design of robust monetary rules pp. 70-88 Downloads
Paul Levine
Education Briefing: The role of capital-labour substitution in economic growth pp. 89-101 Downloads
Debdulal Mallick

Volume 4, issue 2, 2011

Human capital, migration and rural entrepreneurship in China pp. 100-122 Downloads
Jialu Liu
The distributional impact of common-pool resource regulations pp. 123-141 Downloads
Stefan Ambec and Carine Sebi
Environmental regulation, green R&D and the Porter hypothesis pp. 142-152 Downloads
Indrani Roy Chowdhury and Sandwip K. Das
Interest rate discrimination, tenancy and cost sharing pp. 153-165 Downloads
Bibhas Saha and Tridib Sharma
Policy Focus: Monetary policy in India: is something amiss? pp. 166-190 Downloads
Riccardo Cristadoro and Giovanni Veronese

Volume 4, issue 1, 2011

A simple model of the financial crisis of 2007-2009, with implications for the design of a stimulus package pp. 5-21 Downloads
Kaushik Basu
Self-selection vs learning: evidence from Indian exporting firms pp. 22-37 Downloads
Priya Ranjan and Jibonayan Raychaudhuri
The political economy of revenue pressure and tax collection efficiency pp. 38-52 Downloads
Satya Das
Club-convergence and polarization of states: A nonparametric analysis of post-reform India pp. 53-72 Downloads
Sabyasachi Kar, Debajit Jha and Alpana Kateja
Policy Focus: Rising food inflation and India's monetary policy pp. 73-94 Downloads
Vivek Moorthy and Shrikant Kolhar

Volume 3, issue 2, 2010

Impact of infrastructure on output, productivity and efficiency: Evidence from the Indian manufacturing industry pp. 100-121 Downloads
Chandan Sharma and Sanjay Sehgal
On the political economy of a backward region pp. 122-137 Downloads
Abhirup Sarkar
Interaction between trade and environment policies with special-interest politics pp. 138-165 Downloads
Meeta Mehra
Mine over matter? Health, wealth and forests in a mining area of Orissa pp. 166-185 Downloads
Subhrendu Pattanayak, Shubhayu Saha, Pravash Sahu, Erin Sills, Ashok Singha and JuiChen Yang
Policy Focus: Some lessons for economists from the financial crisis pp. 186-208 Downloads
Thomas Willett
Book Review: Monetary, Investment, and Trade Issues in India, Edited by Ramkishen S. Rajan pp. 209-213 Downloads
Abhijit Sen Gupta

Volume 3, issue 1, 2010

Blood diamonds: international policy options for conflict resolution pp. 5-20 Downloads
Sajal Lahiri
Is the downturn in maquiladora employment cyclical or structural? pp. 21-35 Downloads
Kusum Mundra and Jim Gerber
Inflation convergence and currency unions: the case of the East African community pp. 36-52 Downloads
N Kishor and John Ssozi
Price discovery and convergence in the Indian commodities market pp. 53-61 Downloads
Vishwanathan Iyer and Archana Pillai
Policy Focus: Networks, middlemen and other (urban) labour market mysteries pp. 62-80 Downloads
Vegard Iversen and Gaute Torsvik
Education Briefing: The distribution of wealth in the neoclassical growth model pp. 81-91 Downloads
Subrata Guha
Book Review: Taming the Anarchy: Groundwater Governance in South Asia by Tushaar Shah pp. 92-94 Downloads
E. Somanathan
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