Climate change is having adverse implications for agricultural yields in India, especially in Bih... more Climate change is having adverse implications for agricultural yields in India, especially in Bihar. Bihar is also less resilient to climate change requiring climate adaptation. Within adaptation, it is important to understand the channels of autonomous adaptation besides planned adaptation. So far, most studies have had the focus on technology-based planned adaptation, while autonomous adaptation has gained eminence for sustainability in agriculture. This research lls the gap to understand the role of autonomous adaptation-through channels of inherent ability and community networks-on agricultural productivity in case of paddy and wheat crops. We use a mix of quantitative perception analysis and survey econometric methods to delineate the role of these two channels. The survey of farmers is based on strati ed random sampling for two districts of Bihar, belonging to different agro-climatic zones: Gaya (drought-prone) and Purnia (oodprone). Our research nds that farming communities are discerning about climate change and rely on adaptation, through planned and autonomous channels. The effectiveness of planned adaptation is rather weak in both districts. The main empirical nding is that ancestral knowledge and community networks have positive impacts on paddy and wheat yields. However, results differ for types of community networks. Formal community networks boost crop yields, while informal community networks dampen paddy yields, but improve wheat yields in both districts.
The paper utilizes a model of endogenous growth with vertical innovation (á la Aghion-Howitt) to ... more The paper utilizes a model of endogenous growth with vertical innovation (á la Aghion-Howitt) to examine how the inclusion of a production related pollution externality affects the prospect for long-run growth of a closed economy. It is derived that the social optimum exhibits the possibility of long-run sustainable growth, such that consumption, capital stock and output grow without bound, knowledge also grows in an unbounded fashion, and both-the intensity and stock of pollution-fall. In comparison, at the unregulated market equilibrium, a clear conflict arises between sustaining economic growth and environment protection, as growing pollution stock ceases the opportunity for long run growth in output, capital stock and consumption. Finally, in deriving the optimal public policy tool-kit, given the distortions in the unregulated market economy, it is shown that a positive and growing rate of tax on pollution, an ad valorem subsidy on capital and a positive R and D subsidy would implement the socially desirable outcome. However, a theoretical possibility of an optimal tax on R and D cannot be ruled out in an exceptional situation of too low a productivity of the R and D sector.
Indian Growth and Development Review, Sep 28, 2010
The paper examines interdependencies between trade and environment policies, as they get jointly ... more The paper examines interdependencies between trade and environment policies, as they get jointly determined in a political-economy model of a small open economy. Following Grossman and Helpman (1994), the structure of trade protection and environment policy is characterized when government is not a benevolent maximizer of social welfare. Campaign contributions help win the elections and provide it the incentive to distort policies to attract contributions from lobbies. With bargaining over more than one policy instrument, it may trade-off one policy for the other, to strike a balance between favors to lobbies and loss in social welfare. It may tax imports higher to offset the cost of stricter environment regulation or reduce import protection to counter the effect of a lenient environment policy. Interestingly, whilst the government always 'concedes' by providing positive tariff protection to the import-competing sector at home, it may or may not give in to lobby's demand for lower pollution tax. Moreover, the equilibrium level of import protection is positively related to the world price of the importable good, a result that ties in with the literature on the political economy of protection to declining industries (Hillman 1982).
The paper analyzes how the equilibrium electoral policy platforms change in a probabilistic model... more The paper analyzes how the equilibrium electoral policy platforms change in a probabilistic model of electoral competition between two purely opportunistic and corrupt candidates in the presence of exogenously given interest groups. The economic policy of interest in this model is the tax to fund the public good provision. We derive equilibrium tax platforms for three different specifications of the model: benchmark (no swing voters and no lobbies), pure-swing and swing-voter plus interest groups. It is found that the equilibrium tax platform of an electoral candidate under benchmark scenario is greater than or equal to the same under the pure swing voter case because the presence of swing-voters in the economy dilutes the intensity of economic policy preferences of each group and therefore the choice of (tax) policy. Furthermore, it is found that, an increase in the honesty parameter of the candidate results in greater donations by the interest group towards that candidate. Additionally, two significant effects have been found to be at work in driving the comparative static results, namely the relative swing voter effect and the relative organizational strength of lobbies effect. Based on which of these two effects is stronger, we find that the equilibrium policy platforms of candidates (tax platform) sway in favour of the more dominant voter group.
The paper analyses complex interactions between intra-industry trade (IIT) and environment by ext... more The paper analyses complex interactions between intra-industry trade (IIT) and environment by extending Krugman's model of monopolistic competition and trade. It is found that an increase in exogenous environmental tax by a country leads to a fall in its output (the scale effect) and aggregate pollution, and an increase in its number of varieties (the selection effect). With IIT, if Home is a net exporter, an increase in its environmental stringency leads to a negative scale effect, which reduces its export demand and raises its import demand. In contrast, a positive selection effect reduces its import demand. However, the first-order scale effect on exports dominates the second-order effect on imports, implying a rise in Home's share of IIT with Foreign. The opposite holds true when Home is a net importer. Furthermore, the impact of a rise in environmental tax on aggregate welfare comprises the following counteracting effects: a negative scale effect, a positive selection effect, a lower level of aggregate pollution and a higher environmental tax revenue in autarky, and two additional effects, namely, changes in the level of exports and imports, under free trade. The overall change in aggregate welfare, in both autarky and free trade, is in general ambiguous.
We examine human capital's contribution to economy-wide technological progress through two channe... more We examine human capital's contribution to economy-wide technological progress through two channels-imitation and innovation-innovation being more skilled-intensive than innovation. We develop a growth model considering an endogenous ability-driven skill acquisition decision of an individual. We show that skilled labor is growth enhancing in the "imitation-innovation" regime and the "innovation-only" regime whereas unskilled labor is growth enhancing in the "imitation-only" regime. Steady state exists and, in the long run, an economy may or may not converge to the world technology frontier, depending on its initial position and the growth rate of the frontier economy. In the diversified regime, technological progress raises the return to ability and generates an increase in wage inequality between and within groups-consistent with the pattern observed across countries.
An overlapping generations version of an R&D-based growth model 'a la Diamond (1965) and Jones (1... more An overlapping generations version of an R&D-based growth model 'a la Diamond (1965) and Jones (1995) is built to examine how improvement in quality of schooling impact technical progress and long-run economic growth of an economy by influencing fertility and education decisions at household level. The results indicate that improvement in schooling quality triggers a child quantity-quality trade-off at household level when quality of schooling exceeds an endogenously determined threshold. At the household level, parents invest more in education of children and have lesser number of children in response to improvement in quality of schooling. This micro-level tradeoff has two opposing effects on aggregate human capital accumulation at macro level. Higher investment in education of a child stimulates the accumulation of human capital which fosters technical progress but the simultaneous decline in fertility rate reduces the total factor productivity growth and economic growth by contracting the pool of available researchers. The first effect prevails over latter only when quality of schooling is higher than the threshold.
Global warming caused by accumulation of emissions of greenhouse gases (GHGs) is a public bad, ad... more Global warming caused by accumulation of emissions of greenhouse gases (GHGs) is a public bad, addressing which requires collective action by all the countries of the world. Under the United Nations Convention on Climate Change (UNFCCC), most countries have negotiated the Kyoto Protocol for GHG emissions control to stabilize climate change. Several issues about the Protocol remain unresolved-first, most of the significant countries are required to take a decision on whether or not to sign such a protocol, which has large-scale implications for their energy and industrial sectors and economic well-being; second, climate change mitigation is a public good entailing that all the countries would stand to gain due to mitigation action taken by a subgroup of one or more countries; and third, there exists no supra-national authority to enforce such a protocol for the individual sovereign nations. Thus, commitment to cooperate on an international agreement on climate change control remains tenuous. Formally, such a cooperative model is likely to be unstable. The paper discusses the pros and cons of the already proposed international cooperative mechanisms toward climate change mitigation and highlights the problem of information revelation, particularly related to the abatement issues. In this context, it attempts to outline a structure of a selfenforcing burden sharing mechanism for climate change mitigation in an incomplete information framework. The mechanism is an adoption of the well-known Vickrey-Clarke-Groves mechanism, widely used in mechanism design theory.
Climate change is having adverse implications for agricultural yields in India, especially in Bih... more Climate change is having adverse implications for agricultural yields in India, especially in Bihar. Bihar is also less resilient to climate change requiring climate adaptation. Within adaptation, it is important to understand the channels of autonomous adaptation besides planned adaptation. So far, most studies have had the focus on technology-based planned adaptation, while autonomous adaptation has gained eminence for sustainability in agriculture. This research lls the gap to understand the role of autonomous adaptation-through channels of inherent ability and community networks-on agricultural productivity in case of paddy and wheat crops. We use a mix of quantitative perception analysis and survey econometric methods to delineate the role of these two channels. The survey of farmers is based on strati ed random sampling for two districts of Bihar, belonging to different agro-climatic zones: Gaya (drought-prone) and Purnia (oodprone). Our research nds that farming communities are discerning about climate change and rely on adaptation, through planned and autonomous channels. The effectiveness of planned adaptation is rather weak in both districts. The main empirical nding is that ancestral knowledge and community networks have positive impacts on paddy and wheat yields. However, results differ for types of community networks. Formal community networks boost crop yields, while informal community networks dampen paddy yields, but improve wheat yields in both districts.
The paper utilizes a model of endogenous growth with vertical innovation (á la Aghion-Howitt) to ... more The paper utilizes a model of endogenous growth with vertical innovation (á la Aghion-Howitt) to examine how the inclusion of a production related pollution externality affects the prospect for long-run growth of a closed economy. It is derived that the social optimum exhibits the possibility of long-run sustainable growth, such that consumption, capital stock and output grow without bound, knowledge also grows in an unbounded fashion, and both-the intensity and stock of pollution-fall. In comparison, at the unregulated market equilibrium, a clear conflict arises between sustaining economic growth and environment protection, as growing pollution stock ceases the opportunity for long run growth in output, capital stock and consumption. Finally, in deriving the optimal public policy tool-kit, given the distortions in the unregulated market economy, it is shown that a positive and growing rate of tax on pollution, an ad valorem subsidy on capital and a positive R and D subsidy would implement the socially desirable outcome. However, a theoretical possibility of an optimal tax on R and D cannot be ruled out in an exceptional situation of too low a productivity of the R and D sector.
Indian Growth and Development Review, Sep 28, 2010
The paper examines interdependencies between trade and environment policies, as they get jointly ... more The paper examines interdependencies between trade and environment policies, as they get jointly determined in a political-economy model of a small open economy. Following Grossman and Helpman (1994), the structure of trade protection and environment policy is characterized when government is not a benevolent maximizer of social welfare. Campaign contributions help win the elections and provide it the incentive to distort policies to attract contributions from lobbies. With bargaining over more than one policy instrument, it may trade-off one policy for the other, to strike a balance between favors to lobbies and loss in social welfare. It may tax imports higher to offset the cost of stricter environment regulation or reduce import protection to counter the effect of a lenient environment policy. Interestingly, whilst the government always 'concedes' by providing positive tariff protection to the import-competing sector at home, it may or may not give in to lobby's demand for lower pollution tax. Moreover, the equilibrium level of import protection is positively related to the world price of the importable good, a result that ties in with the literature on the political economy of protection to declining industries (Hillman 1982).
The paper analyzes how the equilibrium electoral policy platforms change in a probabilistic model... more The paper analyzes how the equilibrium electoral policy platforms change in a probabilistic model of electoral competition between two purely opportunistic and corrupt candidates in the presence of exogenously given interest groups. The economic policy of interest in this model is the tax to fund the public good provision. We derive equilibrium tax platforms for three different specifications of the model: benchmark (no swing voters and no lobbies), pure-swing and swing-voter plus interest groups. It is found that the equilibrium tax platform of an electoral candidate under benchmark scenario is greater than or equal to the same under the pure swing voter case because the presence of swing-voters in the economy dilutes the intensity of economic policy preferences of each group and therefore the choice of (tax) policy. Furthermore, it is found that, an increase in the honesty parameter of the candidate results in greater donations by the interest group towards that candidate. Additionally, two significant effects have been found to be at work in driving the comparative static results, namely the relative swing voter effect and the relative organizational strength of lobbies effect. Based on which of these two effects is stronger, we find that the equilibrium policy platforms of candidates (tax platform) sway in favour of the more dominant voter group.
The paper analyses complex interactions between intra-industry trade (IIT) and environment by ext... more The paper analyses complex interactions between intra-industry trade (IIT) and environment by extending Krugman's model of monopolistic competition and trade. It is found that an increase in exogenous environmental tax by a country leads to a fall in its output (the scale effect) and aggregate pollution, and an increase in its number of varieties (the selection effect). With IIT, if Home is a net exporter, an increase in its environmental stringency leads to a negative scale effect, which reduces its export demand and raises its import demand. In contrast, a positive selection effect reduces its import demand. However, the first-order scale effect on exports dominates the second-order effect on imports, implying a rise in Home's share of IIT with Foreign. The opposite holds true when Home is a net importer. Furthermore, the impact of a rise in environmental tax on aggregate welfare comprises the following counteracting effects: a negative scale effect, a positive selection effect, a lower level of aggregate pollution and a higher environmental tax revenue in autarky, and two additional effects, namely, changes in the level of exports and imports, under free trade. The overall change in aggregate welfare, in both autarky and free trade, is in general ambiguous.
We examine human capital's contribution to economy-wide technological progress through two channe... more We examine human capital's contribution to economy-wide technological progress through two channels-imitation and innovation-innovation being more skilled-intensive than innovation. We develop a growth model considering an endogenous ability-driven skill acquisition decision of an individual. We show that skilled labor is growth enhancing in the "imitation-innovation" regime and the "innovation-only" regime whereas unskilled labor is growth enhancing in the "imitation-only" regime. Steady state exists and, in the long run, an economy may or may not converge to the world technology frontier, depending on its initial position and the growth rate of the frontier economy. In the diversified regime, technological progress raises the return to ability and generates an increase in wage inequality between and within groups-consistent with the pattern observed across countries.
An overlapping generations version of an R&D-based growth model 'a la Diamond (1965) and Jones (1... more An overlapping generations version of an R&D-based growth model 'a la Diamond (1965) and Jones (1995) is built to examine how improvement in quality of schooling impact technical progress and long-run economic growth of an economy by influencing fertility and education decisions at household level. The results indicate that improvement in schooling quality triggers a child quantity-quality trade-off at household level when quality of schooling exceeds an endogenously determined threshold. At the household level, parents invest more in education of children and have lesser number of children in response to improvement in quality of schooling. This micro-level tradeoff has two opposing effects on aggregate human capital accumulation at macro level. Higher investment in education of a child stimulates the accumulation of human capital which fosters technical progress but the simultaneous decline in fertility rate reduces the total factor productivity growth and economic growth by contracting the pool of available researchers. The first effect prevails over latter only when quality of schooling is higher than the threshold.
Global warming caused by accumulation of emissions of greenhouse gases (GHGs) is a public bad, ad... more Global warming caused by accumulation of emissions of greenhouse gases (GHGs) is a public bad, addressing which requires collective action by all the countries of the world. Under the United Nations Convention on Climate Change (UNFCCC), most countries have negotiated the Kyoto Protocol for GHG emissions control to stabilize climate change. Several issues about the Protocol remain unresolved-first, most of the significant countries are required to take a decision on whether or not to sign such a protocol, which has large-scale implications for their energy and industrial sectors and economic well-being; second, climate change mitigation is a public good entailing that all the countries would stand to gain due to mitigation action taken by a subgroup of one or more countries; and third, there exists no supra-national authority to enforce such a protocol for the individual sovereign nations. Thus, commitment to cooperate on an international agreement on climate change control remains tenuous. Formally, such a cooperative model is likely to be unstable. The paper discusses the pros and cons of the already proposed international cooperative mechanisms toward climate change mitigation and highlights the problem of information revelation, particularly related to the abatement issues. In this context, it attempts to outline a structure of a selfenforcing burden sharing mechanism for climate change mitigation in an incomplete information framework. The mechanism is an adoption of the well-known Vickrey-Clarke-Groves mechanism, widely used in mechanism design theory.
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