Ashok Parikh

Measurement of Economic Efficiency in Pakistani Agriculture

The behavioral and stochastic cost frontier functions are applied to estimate cost inefficiency by farms. The behavioral approach satisfies most of the assumptions of dual cost function and the likelihood ratio test rejects the market efficiency hypothesis implying less than optimum use of manures, labor, and fertilizers. A suboptimal use is explained by holding size, education, credit, and subsistence needs. Small farms seem to be more efficient than large farms in the region. A measure of inefficiency based on a stochastic cost frontier approach confirms the results of the behavioral approach.

Instability and Volatility of Capital Flows to Developing Countries

AbstractThe following sections are included:IntroductionThe Controversy on External Financial LiberalisationTrends in Capital Flows to Developing CountriesInstability and Volatility of Total Capital Flows and Their ComponentsShort-Term Arbitrage-Seeking Capital MovementsInstability, Volatility Indicators and Granger Causality Analysis on Short-Term Inflows and OutflowsBivariate granger causality tests performed on short-term inflows and outflows using IMF dataInflowsOutflowsPolicy Options to Deal with Capital Flows VolatilitySummary and ConclusionsReferences

Measurement of profit efficiency using behavioural and stochastic frontier approaches

The objectives of this study are to estimate profit inefficiency of farms in the North-west Frontier Province of Pakistan using stochastic frontier and the behavioural profit functions. The derived measure of inefficiency, based on a half-normal distribution of the stochastic error term, is related to socio-economic variables; and of these, the size of holding, fragmentation of land,subsistence needs the higher age of farmers contribute positively to inefficiency. The behavioural approach satisfies most of the assumptions of the dual profit function and the likelihood ratio test rejects the market efficiency hypothesis. It is also shown that use of manures, labour and fertilizers is below the optimum. Small farms seem to have higher productive efficiency than large farms and, therefore small farm ownership needs to be encouraged.

Do fiscal deficits influence current accounts? A case study of India

This paper examines the effects of fiscal deficits on the current account deficits in the Indian economy. In many developing countries, fiscal deficits are mostly financed through monetization, causing crowding out of private investment expenditures. However, fiscal deficits in India are mostly financed through official borrowings from various external sources, leading to higher interest payments and outgoings on the external account. Such a policy could eventually precipitate balance of payments crises despite favorable trade account and real exchange rate. Data over three decades for the Indian economy show that, in addition to the real exchange rate and the ratio of private investment to GDP, fiscal deficits significantly contribute to the current account deficits.

Decomposition of Inequality Measures and a Comparative Analysis

The main objectives of the paper are to decompose Atkinsons measure into within-group and between-group inequality and to compare it with decompositions of inequality measures, like the Gini coefficient, variance of logarithms, Theils entropy index and the square of the coefficient of variation. Atkinsons inequality index is given an interpretation of mean order β and then it is decomposed for population subgroups. Various other measures are considered for decompositions and a variety of decomposition schemes for Gini coefficient and other measures in the literature is reviewed and commented upon. Empirical analysis using U.S.A. and U.K. data are performed on the basis of income distribution data classified by family size. For various decomposition schemes, contribution to between size-group and within size-group inequalities are compared in percentage terms. Comparisons are also made over time for the years 1964 and 1974 both for U.S.A. and U.K. and the result indicates that within size-group income inequality has declined while between size group and total income inequality shows an increase. Three important properties of Atkinsons inequality index are proved in the appendix.

Disciplining firms:The impact of trade reforms on profit margins in Indian industry

The paper analyses the effects of increased trade exposure on the profitability of firms in Indian industry. While trade reforms are often expected to decrease profit margins as firms struggle to compete in international markets, there is the possibility that increased competition may improve firm efficiency and provide a positive impetus to firm profitability. This paper is different from many others in this area in that it considers both these possibilities. An efficiency index is created to directly analyse the impact of changing efficiency levels on firm profit margins. Results indicate that liberalization significantly influenced profit margins. However, its main effect is through the impact that it has had on other firm variables - market shares, advertising, R&D and exports - all of which changed after 1991. While exports have had a pro-competitive effect on profit margins in the selected sample, AD and R&D both cause an increase in profit margins. It is also found that neither capital nor managerial capabilities (as proxied by remuneration) are particularly effective in increasing profit margins.

Modelling real exchange rate behaviour: a cross-country study

The paper examines the behaviour of bilateral real exchange rates between Germany and fourteen major economies for the period January 1972 to December 1994. Time series techniques are used to consider a number of hypotheses including whether the real exchange rate is mean reverting; whether deviations follow a stable time series process; whether the underlying process can be modelled adequately and whether there is any evidence of risk premia. Evidence is provided that relationships of these sort can indeed be established for a selection of economies and that despite economic policy directed towards exchange rate stability, significant risk premia are present in the bilateral real exchange rates examined.

Stock returns and economic activity: the UK case

This paper investigates the relationships between real stock returns and a number of financial and economic variables for the UK economy for the period 1980 to 1994. We begin by discussing a theoretical model proposed by Balvers et al. and then re-estimate for the UK what may be regarded as an application of that model by Fama applied to the US market. This reproduces Famas main results. For the UK we than suggest a slightly, different application of the Balvers model, the most important feature of which is the use of expectational macro-economic variables instead of Famas use of leading values of industrial production. We then go on to investigate the unit root properties of the data and show that much of the data is indeed characterized by the presence of unit root non stationarity In the light of this, we propose an application of the Phillips-Loretan error-correction model and show that this provides a plausible relationship between real stock returns and most of the financial and economic variables.

Missing women in Indian districts: a quantitative analysis

Abstract The ratio of women to men in India reveals socially determined excess female mortality. The cultural and economic variables used to explain variations in the juvenile sex ratio are interrelated with each other and with other demographic and economic variables, and show large regional differences within India. Our empirical study is built on an extension to Sens entitlements framework and spatial lag and spatial error econometric procedures. We find that low female labour participation (FLP) is an important determinant of anti-female child bias in regions characterised by both Indo-Aryan and Dravidian kinship systems, but where Indo-Aryan kinship predominates, mainly in Northern India, the effect of FLP is much more significant.

Measurement of economic efficiency using the behavioral and stochastic cost frontier approach

The purpose of this study is to estimate the cost inefficiency by farms using (1) behavioral and (2) stochastic cost frontier functions. The derived measure of inefficiency based on half-normal and/or exponential distribution of one-sided error term is related to socioeconomic variables, and of these, the size of holding, fragmentation of land, subsistence needs, and higher age of farmers contributes positively to inefficiency. The behavioral approach satisfies most of the assumptions of the dual cost function, and the likelihood ratio test rejects the market-efficiency hypothesis. This approach asserts that there is less than optimum use of manures, labor, and fertilizers. The non-optimum use is explained by holding size, education, credit, and subsistence needs. Small farms seem to be more efficient than large farms in the region.