Bibhas Saha

Red tape, incentive bribe and the provision of subsidy

Abstract An agent entitled to receive subsidy bribes the government official to reduce red tape from an exogenous level. The agent has private information on his cost from red tape. Which type of the agent, high or low cost, would be able to exploit the private information depends on the level of the exogenous red tape. At low levels of the exogenous red tape, it is the high type, and at high levels it is the low type that earns information rent. At moderate red tape, neither may earn rents. With greater red tape, the agents profit can increase.

Schooling, Informal Experience, and Formal Sector Earnings: A Study of Indian Workers

This paper estimates an earnings function for male workers belonging to the Indian corporate sector. The model allows for differential rates of return to schooling and distinguishes tenure from total labor market experience. The rate of return to schooling is found to be low up to the junior level, increases significantly at the secondary and undergraduate levels, but sharply declines at the masters level. Seniority and firm-specific factors are found to be important determinants of earnings. When years of unemployment and informal experience are incorporated, earnings of low-education workers appear to be driven entirely by formal-sector experience. Copyright 1999 by Blackwell Publishing Ltd

Match-fixing under competitive odds

Two bookmakers compete in Bertrand fashion while setting odds on the outcomes of a sporting contest where an influential punter (or betting syndicate) may bribe some player(s) to fix the contest. Zero profit and bribe prevention may not always hold together. When the influential punter is quite powerful, the bookies may coordinate on prices and earn positive profits for fear of letting the ‘lemons’ (i.e., the influential punter) in. On the other hand, sometimes the bookies make zero profits but also admit match-fixing. When match-fixing occurs, it often involves bribery of only the strong team. The theoretical analysis is intended to address the problem of growing incidence of betting related corruption in world sports including cricket, horse races, tennis, soccer, basketball, wrestling, snooker, etc.

Privatization, Underpricing, and Welfare in the Presence of Foreign Competition

We analyze privatization in a differentiated oligopoly setting with a domestic public firm and foreign profit-maximizing firms. In particular, we examine pricing below marginal cost by public firm, the optimal degree of privatization and, the relationship between privatization and foreign ownership restrictions. When market structure is exogenous, partial privatization of the public firm improves welfare by reducing public sector losses. Surprisingly, even at the optimal level of privatization, the public firms price lies strictly below marginal cost, resulting in losses. Our analysis also reveals a potential conflict between privatization and investment liberalization (i.e., relaxing restrictions on foreign ownership) in the short run. With endogenous market structure (i.e., free entry of foreign firms), partial privatization improves welfare through an additional channel: more foreign varieties. Furthermore, at the optimal level of privatization, the public firms price lies strictly above marginal cost and it earns positive profits.

Wage Commitment, Signalling, and Entry Deterrence or Accommodation

We analyse the wage choice of a monopoly union against entry threat. The wage carries information about market demand, which is crucial to an uninformed entrant, and in addition affects the entrants post-entry cost through labour market institutions. The union may wish to deter or accommodate entry depending on whether the entrant will hire from a different source or from the union. Equilibrium wage is distorted downwardly (upwardly) for deterrence (accommodation); but because of wage correlation a low (high) wage can also turn entry profitable (unprofitable). Therefore, separating equilibrium may not always exist, and entry outcomes may be inefficient. Copyright 2006 The Authors. Journal compilation CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd. 2006.

Private tutoring, school education and government policy

We develop a model of private tutoring where its demand emerges from poor schooling infrastructure and shirking by teachers. We analyse the government’s policy choice and society’s educational outcome. If the teacher is to be made more dutiful, his salary must be raised sufficiently, which means that very little money is left for infrastructure. In contrast, if the overall education is to be improved, better infrastructure is needed; but then the teachers’ salary has to be reduced and private tutoring may partly substitute class room teaching. The households may prefer the latter. This gives rise to a policy dilemma.

Harassment, corruption and tax policy: a comment on Marjit, Mukherjee and Mukherjee [Eur. J. Political Economy 16 (2000) 75–94]

Abstract This comment on Marjit, Mukherjee and Mukherjee [Eur. J. Political Economy 16 (2000) 75–94] shows that their basic model can be simplified by an alternative formulation. A corrupt auditor gives two choices to a taxpayer: pay bribe and evade tax or be overtaxed. Although harassment can be redressed through court, the taxpayer chooses to pay bribe. However, as this note discovers, the bribe–income ratio will critically depend on whether the taxpayer can afford the court fees. This may lead different income groups to have different preferences for corruption.

Job security, wage bargaining and duopoly outcomes

This paper develops a model where labour supply is constrained because training new workers is costly and redundant workers cannot be fired. An entrant draws labour from an incumbent firm through a wage contest while wages in the latter are bargained with its unionized workers. In a Cournot equilibrium, the unions bargaining power has a positive effect on the incumbents output, but a negative effect on the industry output. Social welfare under duopoly may fall short of the monopoly level. The distribution of bargaining gains within the incumbent firm is sensitive to whether wage and output choices are made sequentially or simultaneously.

Match-Fixing in a Monopoly Betting Market

A monopolist bookmaker may set betting odds on a fairly even contest to induce match-fixing by an influential corrupt punter. His loss to the corrupt punter is more than made up for by enticing enough ordinary punters to bet on the losing team. This result is in sharp contrast to competitive bookmaking, where even contests have been shown to be immune to fixing. The analysis also reveals a surprising result that the incidence of match-fixing can dramatically fall when match-fixing opportunities rise. This is shown by comparing two scenarios—when only one team is corruptible and when both are corruptible. For both teams corruptible, the bookmaker is uncertain about to which team the influential punter will have access, so carefully maneuvering the odds to induce match-fixing is too costly.

Institutions or Geography: Which Matters Most for Economic Development?

Although development economics generally confines its attention to the last 60 years, there is a growing body of research that looks back centuries and tries to determine if the events in the long past are responsible for underdevelopment of today’s developing countries. Broadly speaking, there are two views on the long-term determinants of comparative development. One view is that the extractive institutions created during colonization between 1500 and 1900 are responsible for underdevelopment we see today. The other view is that these institutions were created because of particular geographical factors, and the role of geography is played out on a much longer time scale. This article provides a brief survey of the two alternative perspectives on development economics. JEL: N4, O1, O4