Indira Gandhi Institute of Development Research

About: Indira Gandhi Institute of Development Research is a facility organization based out in Mumbai, Maharashtra, India. It is known for research contribution in the topics: Monetary policy & Inflation. The organization has 307 authors who have published 1021 publications receiving 18848 citations.

Training, Unemployment and Fiscal Subsidy: A Harris Todaro Approach

Abstract: We deviate from the Harris and Todaro (1970) model by assuming that the urban firms provide training to the workers. But whether to train or not and how many workers should be trained is decided under imperfectly competitive market conditions. On the other hand, in the rural sector perfect competition prevails. Under these circumstances the urban firms start training at a wage rate less than but very close to the unit cost incurred due to training. The urban employment falls and the rural employment rises. Therefore, the overall unemployment due to training may rise or fall at this wage rate. If the unemployment rises then it is certainly due to the existence of imperfectly competitive firms in the urban sector as well as productivity gain from training. Provision of training subsidy allows firms to start training at a lower wage rate. When turnover is allowed,the training firms start training at a wage rate even higher than that in case of no turnover, as these firms have to offer a higher wage rate in order to prevent poaching by the non-training firms. The social welfare is higher under no-turnover situation as opposed to turnover when the wage rate is fixed at the unit cost of training. An imposition of training subsidy by the government raises the social welfare when turnover is allowed provided the productivity of trained workforce is higher.

Adding-Up Problem and Wage–Productivity Gap in Exports of Developing Countries: A Source of the Middle-Income Trap

Abstract: The possible causes of the middle-income trap phenomenon are diverse, and the difficulty in sustaining export growth, particularly in small open economies in the South (developing countries), can be one such cause. Exports from the South tend to be subject to the adding-up problem, which several studies have argued to happen because of the limited market size in the North (developed countries). The present study revisits the adding-up problem by dealing with diverse factors as determinants of export growth. It considers the following variables: undervaluation to represent the exchange rate effect, the top five trading partners’ weighted GDP growth to represent the market demand effect, and wage–productivity gap to represent the price–cost effect. This research introduces this new variable of wage–productivity gap as a factor, and finds that the adding-up problem occurs not because of the limited market in the North but because of the wage–productivity gap (i.e., low productivity relative to the ever-increasing wage rates) in the South. Moreover, undervaluing currency does not significantly improve the aforementioned condition.

Exchange Rate Regimes: Middling Through

Abstract: The appropriate exchange rate regime, in the context of integration of currency markets with financial markets and of large international capital flows, continues to be a policy dilemma. We find that the majority of countries are moving towards somewhat higher exchange and lower interest rate volatility. Features of foreign exchange (forex) markets could be partly motivating these choices. A model with noise trading, non-traded goods and price rigidities shows that bounds on the volatility of the exchange rate can lower noise trading in forex markets; decrease fundamental variance and improve real fundamentals in an emerging market economy (EME); and give more monetary policy autonomy. Central banks prefer secret interventions where they have an information advantage or fear destabilizing speculation. But in our model, short-term pre-announced interventions can control exchange rate volatility, pre-empt deviations in prices and real exchange rates, and allow markets to help central banks achieve their targets. The long-term crawl need not be announced. In conclusion, the regime's applicability to an EME is explored.

Impact of India's Demonetization on Domestic Agricultural Markets

Abstract: We examine the impact of an extreme monetary shock, India's demonetization of 2016, on domestic agricultural trade. Using data from around 3000 regulated markets for 35 major crops, we find that trade value fell by 16.3 - 16.8 \% in the short run, settling at 11.8 - 12.1 % after eight months - driven primarily by a decline in prices. Triple difference estimates suggest sharpest impacts for kharif crops, perishables and crops with minimal government intervention. Markets far away from banks and other markets fared worse. Our results suggest that the implosion of value of agricultural trade domestically persisted well beyond the season that coincided with the shock, whereas existing findings suggest that the negative impact on the economy as a whole dissipates.