Devashish Mitra

Productivity Growth and Convergence in Agriculture and Manufacturing

The authors examine the growth and convergence of total factor productivity in agriculture and manufacturing in a large sample of countries spanning many levels of development over the period 1967-1992. There is a widely held but rarely tested view that the rate of growth in agricultural productivity is invariably low. But the authors find that the rate of productivity growth in agriculture has been higher than in manufacturing both on average and for groups of countries at different stages of development. The authors find evidence of high rates of technical progress in both agriculture and manufacturing. At all levels of development, however, technical progress appears to have been faster in agriculture than in manufacturing. Moreover, there appears to be a stronger tendency for levels and growth rates of total factor productivity to converge in agriculture than in manufacturing - suggesting that international dissemination of innovations have been relatively rapid in agriculture. These results may well reflect the important investments in agricultural research and development in recent decades. The also highlight the need to continue developing and disseminating innovations if countries are to maintain high rates of productivity growth.

Trade Reforms, Labor Regulations, and Labor-Demand Elasticities: Empirical Evidence from India

Using industry-level data disaggregated by states, this paper finds a positive impact of trade liberalization on (the absolute values of) labor demand elasticities in the Indian manufacturing sector. The magnitudes of these elasticities turn out to be negatively related to protection levels that vary across industries and over time. Furthermore, we find that these elasticities are not only larger in size for Indian states with more flexible labor regulations, they are also impacted there to a larger degree by trade reforms. Finally, we find that the reforms have led to a reduction in the share of labor in total output and value added, possibly due to the reduction in the bargaining power of workers.

Protection For Sale In A Developing Country: Democracy Vs. Dictatorship

For a genuine small open economy that has experienced both dictatorship and democracy, we find support for the predictions of the Grossman-Helpman (1994) Protection for Sale model. In contrast to previous studies, we use various protection measures (including tariffs, the direct measure of the theoretical model) and perform both single-year and panel regressions. Using Turkish industry-level data, the governments weight on welfare is estimated to be much larger than that on contributions. More importantly, we find that this weight is generally higher for the democratic regime than for dictatorship.

Trade liberalization and labor demand elasticities: evidence from Turkey

Abstract In the recent debate over the impact of trade reform on factor markets, it has been argued that trade liberalization will lead to an increase in labor-demand elasticities — thus placing labor markets under increased pressure. Using Turkish plant-level data spanning the course of a dramatic trade liberalization, we test this idea. However, we are unable to find any empirical support for this supposed theoretical link: in most of the industries we consider, we cannot reject the hypothesis of no relationship between trade openness and labor-demand elasticities.

Inequality and the Instability of Polity and Policy

We create alternative measures of political instability, which capture only movements from dictatorship to democracy and vice versa and, unlike older, well-known measures, does not capture government changes that preserve the democratic or dictatorial structure of the country. We show that inequality is positively correlated with our measures of political instability as well as with a well-known measure (used by Alesina and Perotti) but the impact of inequality on the latter is only through components of political instability captured by our measures. We show that our measures have significant policy implications - political instability increases both fiscal and trade polity volatility. Copyright (C) The Author(s). Journal compilation (C) Royal Economic Society 2008.

Endogenous political organization and the value of trade agreements

Abstract In a bargaining model of endogenous protection, I introduce fixed costs of political-organization that need to be incurred by capitalists prior to actual lobbying. Unlike Maggi and Rodriguez-Clare [J. Pol. Econ. 106(3) (1998) 575] intersectoral capital mobility is disallowed. Nevertheless, I am still able to obtain their main result that a government with low bargaining power vis-a-vis the import-competing lobby precommits to a free-trade agreement. Further, with high fixed organizational costs, the government prefers to stay out of such agreements. Its maximum bargaining power consistent with signing a trade agreement has an inverse-V-shaped relationship with respect to the size of fixed costs.

Indian manufacturing : a slow sector in a rapidly growing economy

In this paper, we investigate the determinants of productivity in Indian manufacturing industries during the period 1988–2000. Using two-digit industry level data for the Indian states, we find evidence of imperfect interindustry and interstate labor mobility as well as misallocation of resources across industries and states. We find that trade liberalization increases productivity in all industries across all states. Productivity is also found to be higher in the less protected industries. These effects of protection and trade liberalization are more pronounced in states that have relatively more flexible labor markets. Similar effects are also found in the case of employment, capital stock and investment. Furthermore, we find that labor market flexibility, independent of other policies, has a positive effect on productivity. Importantly, per capita state development expenditure seems to be the strongest and the most robust predictor of productivity, employment, capital stock and investment. Industrial delicensing increases both labor productivity and employment but only in the states with flexible labor market institutions. Even after controlling for delicensing, trade liberalization is shown to have a productivity-enhancing effect. Finally, trade liberalization benefits most the export-oriented industries located in states with flexible labor-market institutions.

On the Endogenous Choice between Protection and Promotion

In a model of strategic interaction between firms in lobbying activity, I show that capitalists might prefer tariffs (protection) to production subsidies (promotion). This is due to the congestion problem arising from the governments convex welfare costs of providing subsidies as opposed to both the free-rider problem and the congestion problem acting in opposite directions in the case of tariffs. If an industry association exists, coordination can be achieved when lobbying for tariffs, but not in the case of production subsidies.

Trade Liberalization and Poverty Reduction: New Evidence from Indian States

As is widely acknowledged, the incidence of poverty in India has declined steadily over the last several decades. What is debated, however, is the pace at which poverty has declined and its relationship with Indias economic reforms. In particular, a key concern among policymakers and researchers alike is that trade liberalization undertaken in the early 1990s may have slowed the progress made in reducing poverty. In this paper, we update our previous econometric analysis on the links between trade liberalization and poverty reduction in India. By incorporating measures of poverty based on the 2004-05 consumer expenditure survey carried out by Indias National Sample Survey Organisation, we are able to sidestep the controversy-ridden poverty measures based on the 1999-2000 survey. Our new results are in line with the earlier ones in Hasan, Mitra and Ural (2007): States, and regions within states, that were more exposed to trade liberalization on account of their employment structures did not experience slower reduction in poverty; on the contrary, to the extent that we find a statistically significant relationship between trade liberalization and poverty reduction, the evidence points to faster poverty reduction in states and regions experiencing greater increases in exposure to trade. Moreover, this relationship is typically stronger in states with more flexible labor regulations, better quality transportation infrastructure, and more developed financial systems.

Explaining Agricultural Distortion Patterns : The Roles of Ideology, Inequality, Lobbying and Public Finance

In this paper, the authors examine the political economy drivers of the variation in agricultural protection, both across countries and within countries over time. The paper starts by listing the key insights provided by both the theoretical and empirical literature on the political economy of trade policy formulation. The authors then set out a basic framework that allows us to put forth various testable hypotheses on the variation and evolution of agricultural protection. The authors find that both the political ideology of the government and the degree of income inequality are important determinants of agricultural protection. Thus, both the political-support-function approach as well as the median-voter approach can be used in explaining the variation in agricultural protection across countries and within countries over time. The results are consistent with the predictions of a model that assumes that labor is specialized and sector-specific in nature. Some aspects of protection also seem to be consistent with predictions of a lobbying model in that agricultural protection is negatively related to agricultural employment and positively related to agricultural productivity. Public finance aspects of protection also seem to be empirically important.