International Trade in Commodities and Services: Static and Dynamic Effects, with Satya P. Das
Updated: December 2014. Available on request.
Abstract: In the backdrop of service-sector growth in national outputs and international trade, this paper develops a theoretical model in which trade in commodities and trade in services are differentiated. It examines (one-period) static level effects, and dynamic (growth) effects of liberalization in commodities and services trade. Within the model's framework, the long-run sectoral growth rates in an economy are unaffected by any change in trade regime. But during periods of transition there is non-balanced growth across sectors, which is affected by trade regime changes. Transitional dynamics arises from that services are non-essential in the utility function, which implies a variable rate of intertemporal substitution in the household consumption of services. Static and dynamic effects are shown to depend on comparative advantage as well as features of trade among similar countries.
Tax Policy and Food Security, with Pawan Gopalakrishnan
Updated: November 2014. Available on request.
Abstract: We build a two sector
(agriculture and manufacturing) heterogenous agent model
to analyze the effects of a food subsidy program on
output and employment. The government may finance this
subsidy by levying a distortionary income tax or a tax
on manufacturing consumption. We find that in the long
run the program increases the output of the food sector
but lowers the manufacturing output, independent of the
method of its financing. While the price of food crop
relative to the price of manufacturing good falls under
an income tax regime, it increases under the consumption
tax regime. We also determine the welfare effects on the
farmer and the entrepreneur under both tax regimes. The
program may have long-run welfare gains for both agents
only for a certain range of subsidies. However, we find
that financing this program using an indirect
consumption tax regime is Pareto superior to a direct
income tax regime.
Non-balanced Growth: The Role of Land, with Satya P. Das
Updated: December 2013. Available on request.
Abstract: The paper analyzes the role of land in explaining non-balanced growth in an economy. It develops a three-sector, closed-economy model, with agriculture, manufacturing and services sectors. Exogenous growth in sectoral TFP and labor serve as the basis of growth. Agriculture and manufacturing sectors use land as input, while services do not, and between agriculture and manufacturing, the former is more land-intensive. Hence, agriculture is most land-intensive, followed by manufacturing and then services. If TFP growth rate differences are small, the ranking of sectoral output growth rates is the reverse of that of sectoral land-intensity, i.e., the growth rate is the fastest in the services sector, followed by manufacturing and then agriculture. The same growth ranking is preserved in the presence of capital accumulation as long as services are the most capital intensive sector, followed by manufacturing and then agriculture.
A Two-Sector Model of Land Acquisition and Growth, with Satya P. Das
Updated: June 2013. Available on request.
Abstract: It develops a two-sector model of growth with agriculture and industry or manufacturing, in which land is an essential input to production in manufacturing. As capital accumulation occurs, land is acquired by the manufacturing sector from the agriculture sector. Unbalanced growth occurs in transitional periods as well as along the steady state. Along with the standard convergence effect, there is a land-acquisition effect on the growth rate of capital in the sense that the growth rate of capital is an increasing function of land acquired by the industrial sector. This may lead to non-monotonic growth rates over time of capital and manufacturing output. There may be an overshooting of growth rates also. We analyze the effects of a rehabilitation and resettlement (R&R) policy on growth and distribution. While such a policy benefits the farmers initially, after a certain time period, it reduces their welfare.
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