Showing papers in "Indian economic review in 2015"

Dynamic Efficiency Measurement

Abstract: A philosophical problem for studies of inefficiency of firms is how to rationalise inefficiency. Since economics do not have any theory for inefficiency, explaining the results of efficiency analyses is notoriously more difficult than carrying out the estimations. The literature points to measures of inputs and management as not including quality dimensions as a reason for measured efficiency differences, indicating that more work needs to be done on data collection. Strategic behaviour in game situations between owners and management and between management and labour may also show up as inefficiencies. Another reason is technology differences. The frontier production function is the key to information on best practice technology. Estimation of efficiency is usually done for units observed during the same time period; thus, in this respect, the measures are static. Interpretations of dynamic efficiency measurement are offered. The vintage model of substitutability between inputs including capital before investment, but no substitution possibilities after investment, and ex post production possibilities characterised by fixed input coefficients, can rationalise inefficiency due to technology differences. Key elements in understanding structural change are the entering of capacity embodying new technology and exiting of capacity no longer able to yield positive quasi-rent. Three crucial production function concepts are identified as follows: the ex ante micro-unit production function as relevant when investing in new capacity, the ex post micro-production function, and the short-run industry production function giving the production possibilities at the industry level. Productivity measurement, taking these types of production functions into consideration, leads to different interpretations of productivity change than traditional approaches not being clear about which production function concept is used.

Data Envelopment Analysis for Performance Evaluation: A Child’s Guide

Abstract: In this paper we offer a simple exposition of the neoclassical production theoretic foundations of Data Envelopment Analysis (DEA). The concepts of technical efficiency (both input and output oriented), scale efficiency, and cost efficiency are explained, and the corresponding DEA models are described in detail. We offer step-by-step instruction on how to write the codes for solving various DEA models using the Solver option in the widely accessible MS Excel software. An important feature of this paper is a detailed exposition of how to write various Visual Basic Macro programs for solving DEA problems. We also describe the non-convex free disposal hull (FDH) procedure and the second-stage regression analysis that seeks to account for variation in measured efficiency scores due to external factors.

Estimation of Technical Inefficiency in Production Frontier Models Using Cross-Sectional Data

Abstract: In this paper, we discuss the specification and estimation of technical efficiency in a variety of stochastic frontier production models. The focus is on cross-sectional models. We start from the basic neoclassical production theory and introduce technical inefficiency in there. Various model specifications with several distributional assumptions on the inefficiency component are explored in detail. Theoretical and empirical issues are illustrated with empirical examples using STATA.

Remittances, Household Expenditure and Investment in Rural India: Evidence from NSS data

Abstract: The paper attempts to study the migration trends and the factors driving it in India and also to understand and compare the marginal spending behavior of three groups of households in India - those not receiving remittances, receiving internal remittances and receiving international remittances - with an emphasis on its impact on investment in human capital defined as education and health. The analysis, based on a nation-wide sample survey, reveals that migration, besides playing a major role in poverty reduction, also has an important bearing on marginal spending behavior much in keeping with Engels Law and also that the amount set aside towards human capital formation is significant, which has wider policy implications.

Globalization, Structural Change and Productivity Growth in the Emerging Countries

Abstract: The paper examines the sources of labor reallocation or structural change, and measures and empirically evaluates the contribution of structural change to labor productivity growth (LPG). The paper also evaluates the relative contributions of human and physical capital to LPG. The paper found that changing final demand is the most crucial factor in labor reallocation in India. In the PRC, this and changes in technology are factors of labor allocation. The regression analysis confirmed that structural change, globalization, and human capital significantly contribute to LPG. Due to its prevailing structure, India is capable of leading global economic growth in the future, provided that certain necessary policies on human capital development, outward-oriented policies, and other conducive economic reform measures are taken. There is enough room for India to use manufacturing as a growth escalator, and for China to tap into services as a growth escalator to avoid the middle income trap.

Religiosity, Schooling and Happiness: A Case for Supplementing Traditional Schooling with Value Education

Abstract: With a view to exploring alternative methods of augmenting personal happiness, the current study examines the variables that affect the two major determinants of happiness: income and positive attitude. Income, the objective determinant of happiness, is already known in the literature to depend on schooling. Following an instrumental variable approach, the current study demonstrates that more schooling by increasing income is likely to enhance an individual’s personal happiness. Following the propensity score matching approach, the current study further demonstrates that religious attendance affects positive attitude, the subjective determinant of happiness, positively. Treating religious attendance as a proxy for value education, the study recommends supplementing traditional schooling with value education to simultaneously improve income and attitude, leading to an increase in personal happiness.

An Econometric Approach to Analysis of Trends and Patterns of Household Fuel Choices in India

Abstract: Studies on fuel choices in India have been confined to looking a broad general picture of household fuel usage and refer to stacking of fuels. However the studies do not cover the number of fuels used, nor do they take into account the differences in fuel choices across the states of India. Using data from NSS household expenditure surveys, the paper defines stacking in terms of the concurrent use of fuel types and builds a conditional logit model to analyse the trends in stacking behaviour of households. The findings suggest that households do shift to superior fuels but do not abandon the inferior fuels altogether. The study discusses the factors affecting the odds ratio for switching to modern fuels.

How do Banks Influence Firm Capital Structure? Evidence from Indian Data

Abstract: Employing data on publicly listed manufacturing firms for the period 1996-2012, the paper examines the interrelationships among leverage, debt maturity and source of debt. The evidence indicates that these three variables are interrelated, with each tending to complement or substitute the other. Disaggregating firms on the basis of equity and board presence, we find that the effect of leverage on debt maturity is the highest for firms that do not exhibit close relationships with banks. Additionally, having no seat on the firm board makes it difficult for banks to exercise control over the firm’s indebtedness.

Social Networks and Labour Productivity: A Survey of Recent Theory and Evidence

Abstract: In this paper we survey some of the more recent theoretical and empirical literature on social networks and labour productivity. We discuss the use of referrals in recruitment of workers and the possible mechanisms underlying their use as well as ex-post effects on productivity from having connected workers in the firm and the channels for these effects. We also suggest some open questions for further research.

Efficiency Measures for Industrial Organization

Abstract: The aim of the paper was to measure the efficiency of an industry and to decompose it in firm efficiencies—which indicate how close firms approximate best practices—and an organization efficiency—which indicates the degree of optimality of the number of firms and their distribution. The latter component provides an efficiency measure for the industrial organization. Economies or diseconomies of scale and of scope play a big role in the determination of the optimal industrial organization and the consequent measurement of the efficiency of an observed industry. Different approaches to the modeling of scale economies will be reviewed. This paper shows in detail how the efficiency of an industrial organization can be measured as a gap between mean firm efficiency and overall industry efficiency. The analysis is extended to dynamic models to measure the role of entry and exit in the efficiency of the industrial organization.

Determinants of OFDI: An Empirical Analysis of OECD Source Countries using Gravity Model

Abstract: This study analyzes the relationship between outward foreign direct investment (OFDI)stocks pertaining to thirty four OECD source and one hundred sixty destination countries(ie bilateral stocks) and other various variables such as size, distance, common language etc using augmented gravity Our principal findings are as follows: (i) the variables of the gravity model (population size, per capita income and distance) explain nearly 50 per cent of the variation in the OFDI stock The coefficients are not only significant but are significantly close to the expected values, (ii) Common language and colonial linkages explain further variations in OFDI stock, over the gravity model (iii) Index of revealed comparative advantage of natural resources for source country bears positive relation with OFDI (iv) Common currency (Euro, in this study) between source and destination country lowers transaction costs and reduces risk in transactions between the source and destination countries to increase OFDI level Overall, the gravity related variables have very large significance, and even if other variables are included their coefficients are unlikely to change

Preference for Dairying Among Rural Women Doing Domestic Duties in India: An Econometric Analysis of Unit Level Data from NSS 68th Round Employment-Unemployment Survey

Abstract: India is the largest producer of milk and its rural women engaged in domestic duties are the pivotal players in this small holder family production system. Though National Sample Survey Office (NSSO) has been publishing special reports on the preferred choice for additional work, among rural women engaged in domestic duties, we do not find any analysis in the literature on the subject. This paper, through an econometric framework, aims to contribute towards bridging this research gap, by investigating how individual characteristics such as social group, occupational type of households, age, literacy, geographical location and income levels affect preference for dairying, as an additional vocation. Thereafter, it also analyses the presence of requisite skill and form of assistance sought for taking up this vocation. The state wise and zone wise disaggregation provides a rich understanding of the local effects and varied profile of women seeking dairying as a means of additional income. These results can be useful for policy makers not only in planning and designing of dairy development programs for rural women across the country but also for rural employment and empowerment programs for women.

Planning and Social Transformation: Remembering D.P. Dhar as a Social Planner

Abstract: The Indian Planning Commission was set up by a Resolution of the Government of India in March 1950. The chief advocate for adopting planning as a necessary prerequisite for giving direction to and coordinating the process of development was Pandit Jawaharlal Nehru. For Pandit Nehru, planning had to be an intrinsic function of government in any developing country that was avowedly committed to socialism. As early as the years 1910-12, while in London as a student, Nehru had been attracted to Fabian socialism, and a philosophical commitment to a socialistic pattern of society was the sheet anchor of his entire political thought process. As a young political leader who later made a mark in the struggle for India's independence from British colonial rule, Nehru was invited to the Soviet Union in 1927 on the tenth anniversary of the October Revolution. Subsequently he keenly followed the spectacular progress achieved by the Soviets after they embarked on their first five year plan in 1928.

Credit Labour Interlinkage Revisited

Abstract: The present paper examines the incidence of credit labour interlinkage under the assumption that the households that take interlinked credit use it as working capital in agriculture. First a theoretical model is developed. Next the theoretical model is empirically validated on the basis of a primary survey conducted in two villages located in the district of North 24 Parganas, of West Bengal in India. Results show that agricultural land holding status of the borrower positively and significantly influences the probability of interlinked loans and sizes of interlinked loans are influenced by the land holding size of the labourers who are taking such loans.

Has Black Income as a Proportion of GDP in India Declined in the Post-Reform Period?

Abstract: Though the rapid growth of black income in India in recent years poses to be a serious economic threat, some recent studies report that it has been declining in the post-reform period. This decline in black income - as these studies claim - has been attributed to the ameliorative effects of economic reforms and liberalization ushered in India in the early nineties. Studies such as Schneider et al. (2003), and Schneider et al. (2010) estimating black income in India from 1960 to 1997 and from 1999 to 2007 respectively conclude that black income in India has declined since 1992-93. Likewise, a recent draft report of the National Institute of Financial Management (NIFM) also notes that the share of black income in the GDP has declined during the 1990's. Apparently this decline in the share of black income in GDP post-reform could be a sign of great relief to the policy makers as well as to the Indian government, reinforcing their belief on the benign effects of structural reforms and liberalization. But such inferences could be highly misleading. The present study contradicting the findings of Schneider et al. (2003), Schneider et al.(2010), and the draft NIFM Report observes that from 1951 to 2011 black income in India has increased at an increasing rate with no sign of abatement even after 1992-93 in the post-reform liberalization period. This contradictory finding of the present study vis-a-vis the earlier studies should be a clarion call to the government and the policy makers to take a serious note of the problem.