EconPapers    
Economics at your fingertips  
 

The Rise and Fall of India's Relative Investment Price: A Tale of Policy Error and Reform

Alok Johri () and Md Mahbubur Rahman ()

Department of Economics Working Papers from McMaster University

Abstract: India's relative price of investment rose 44% from 1981 to 1991 and fell 26% from 1991 to 2006. We build a simple DGE model calibrated to Indian data in order to explore the impact of capital import substitution policies and their reform post-1991, in accounting for this rise and fall. Our model delivers a 23% rise before reform and a 28% fall thereafter. GDP per worker was 2.9% lower in 1991 compared to 1981 due to import restrictions on capital goods. Their removal and a 64 percentage point reduction in tari rates raised GDP per worker permanently by 17.8%.

Keywords: relative price of investment; policy reform in India (search for similar items in EconPapers)
JEL-codes: O11 E17 E2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2017-08-04, Revised 2017-10-03
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://socserv.mcmaster.ca/econ/rsrch/papers/archive/McMasterEconWP2017-12.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mcm:deptwp:2017-12

Access Statistics for this paper

More papers in Department of Economics Working Papers from McMaster University Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2019-04-14
Handle: RePEc:mcm:deptwp:2017-12