Devesh Roy

Trade protection and tax evasion: Evidence from Kenya, Mauritius, and Nigeria

We examine the effect of trade protection rates on evasion in three African countries Kenya, Mauritius, and Nigeria. In capturing the effect of trade protection on tariff evasion, we use a much improved measure of trade protection (MAcMap-HS6 2001 and 2004). For two of these countries, this dataset allows the novelty of using variation in trade protection across product, time, and trading partners leading to significantly refined estimates of evasion elasticity relative to existing studies on tariff evasion. We find a robust evidence for positive elasticity of evasion with respect to tariffs in Kenya and Nigeria with relatively weaker evidence for Mauritius. Our results match the rankings of countries in institutional quality. Greater responsiveness of evasion to the level of tariffs is established in Nigeria (comparatively weak institutional quality) vis-à-vis Kenya, and in Kenya vis-à-vis Mauritius (comparatively good institutional quality). This pattern is preserved even when focusing on same set of trading partners and same set of imported products for the three countries. This result is robust to controlling for protection on related products (that creates incentives/ opportunities for evasion) and also for degree of differentiation of the product and some other characteristics.

National Treatment and the Optimal Regulation of Environmental Externalities

We analyze the role of National Treatment in the regulation of environmental product standards for an open economy. A social planner uses product standards to control emissions from the consumption of a traded good. We show that whether National Treatment of standards interferes with welfare-maximizing policy depends on the instruments available to the policy maker (consumption or emissions tax) and differences in the cost of complying with the standard. We also highlight the asymmetric incidence of the domestic and import product standard when taxes are suboptimal. This asymmetric incidence can also cause welfare-maximizing policy to violate National Treatment.

Financial Reforms and International Trade

Abstract We provide evidence that financial reforms (over 1976–2005) significantly affected exports, in particular, of industries with higher external capital dependence and low asset tangibility. The coverage of reforms is comprehensive, encompassing the banking sector, interest rates, equity and international capital markets. Our methodology improves upon existing studies by controlling for time-varying unobserved exporter characteristics and unobserved country-specific industry characteristics. We find significant effects of various reforms with diverse impacts by intensity. Further, event studies that incorporate possible anticipated and lagged effects of commencement of reform policies confirm the findings.

Gains from coordination in milkfed dairy in Punjab

Purpose - The purpose of this paper is to provide an assessment of benefits to farmers from vertical coordination in dairy. To analyze this, the authors first document the functioning of the cooperative (and changes thereof with increased competition). The paper also uses a field survey to quantify the benefits. In the process, the authors investigate the issue of selection/participation of farmers. Design/methodology/approach - This paper is largely based on a survey of households in two districts of Indian Punjab along with secondary data. Descriptive as well as regression analyses have been conducted to address the research questions. Findings - The paper presents several key findings. First, the public sector enterprise has been dynamic as competition from private sector has brought favorable changes. There is also evidence of negative selection of farmers implying that those who join dairy cooperatives would have significantly inferior outcomes outside vis-a-vis the ones who actually are independent. No bias against farmers by their herd size and significant gains upon participation can explain the scaling up from the demand side. In other words many farmers would find it profitable to become members of the cooperative. Research limitations/implications - Although the survey was extensive in measurement of costs by including variable and fixed costs of production, marketing as well as transaction costs, the data on fixed costs turned out to be noisy. Further, the analysis based on cross-sectional data could not account for unobserved farmer level individual heterogeneity. Also, the outside option for the farmer in this paper is to be independent. It is possible that this could be integration with private sector, a case that the study does not cover. Social implications - Benefits from coordination should motivate policies for promoting it. The finding that increased competition has fostered dynamism in the public sector has implications far beyond the case studied here. Originality/value - Despite the extensive system of cooperatives, there do not exist rigorous studies that assess the gains to farmers from this type of horizontal and vertical coordination. The extent of gains establishes a measure of foregone earnings since the supply chains in India remain uncoordinated.

Investigating demand for biofortified seeds in developing countries: High-iron pearl millet in India

Purpose - – The purpose of this paper is to explore farmer acceptance of a biofortified staple food crop in a developing country prior to its commercialization. The paper focuses on the hypothetical introduction of a high-iron pearl millet variety in Maharashtra, India, where pearl millet is among the most important staple crops. Design/methodology/approach - – A choice experiment is used to investigate farmer preferences for and trade-offs among various production and consumption attributes of pearl millet. The key pearl millet attributes studied include days it takes pearl millet to mature, color of the Findings - – The results reveal that there are three distinct segments in the sample, and there is significant heterogeneity in farmer preferences across these segments. High-iron pearl millet is valued the most by larger households that produce mainly for household consumption and currently have lower quality diets. Households that mainly produce for market sales, on the other hand, derive lower benefits from consumption characteristics such as color and nutrition. Research limitations/implications - – The main limitation of the study is that it uses a stated preference choice experiment method, which suffers from hypothetical bias. At the time of implementing this study biofortified high-iron pearl millet varieties were not yet developed, therefore the authors could not have implemented revealed preference elicitation methods with real products and payment. Originality/value - – The method used (stated preference choice experiment method) is commonly used to value non-market goods such as environmental goods and products that are not yet in the market. It’s application to agriculture and in developing countries is increasing. As far as the authors know this is the first choice experiment implemented to investigate farmer/consumer preferences for biofortified crops. The study presents valuable information for development and delivery of biofortified crops for reducing micronutrient deficiencies.

Free trade and the greening of domestic industry

In this paper we present an example where a domestic import-competing industry can benefit from a pollution tax borne by its consumers. We show that this pollution tax can be similar to a traditional trade barrier (such as a tariff) and can raise the price received by the domestic industry. Given an open economy, we highlight conditions under which domestic producers prefer a higher consumption-based pollution tax than is socially optimal. In contrast, when the economy is closed, we find that producers prefer a pollution tax that is lower than socially optimal. Domestic producers turn ‘green’ only when faced with import competition.

How Standards Drive Taxes: The Political Economy of Tailpipe Pollution

Abstract To control tailpipe pollution, governments often use environmental product standards and consumption taxes in conjunction (for example, the use of fuel economy standards and gasoline taxes to restrict automobile pollution in the US). Further, the choice of standards and consumption taxes is often independently influenced by special interests. For example, domestic producers have the incentive to influence environmental product standards, and likewise, domestic consumers have the incentive to influence the choice of the consumption tax. In this paper we explore the political link between environmental standards and consumption taxes in the presence of independent special interests. We find that despite the independence of special interests, the political outcome is inextricably linked. This political link is different from the welfare maximizing second-best link usually expected between two related policies, and is crucial in correctly anticipating policy outcomes. Specifically, we find that the governments choice of an environmental standard influences political incentives in the choice of the consumption tax. As the environmental standard falls, a higher demand for the environmentally damaging product develops. This higher demand increases the incentives for consumers to lobby for lower consumption tax. Under certain conditions, this political link is large enough to result in a complementary relationship between the two policies in equilibrium. The complementary relationship implies that a lower standard results in a lower consumption tax and vice versa when the standard is higher.

Pulses for food and nutritional security: The technology perspective

Pulses though extremely important from a food security and nutrition perspective in India have lagged behind cereals and have been moved increasingly to marginal environments. The persistent demand supply gap in pulses poses several challenges including technological ones that stem from movement of pulses to difficult environments and its place in relation to the competing crops. Technologies in pulses have evolved in line with the needs such as short duration to meet intercropping requirements. Given the long history of technology development that lags behind principal crops marked by near absence of private sector in R&D in pulses, it may be time to rethink and try demand pull systems of research with Advance Marketing Commitments along the lines suggested for vaccines.

Networks and low adoption of modern technology: the case of pearl millet in Rajasthan, India

Purpose - – This paper aims to study low adoption of modern technology for pearl millet in Rajasthan, India, from the perspective of social networks. The state has the lowest adoption of modern pearl millet seeds among Indian states. . In particular, this paper tries to identify the limitations of channels with endogenous effects, thereby limiting large-scale adoption of modern varieties that would require social multipliers. Design/methodology/approach - – Defining the network/reference groups in terms of social identity and geographical proximity, this paper utilizes the intensity of interaction with different network nodes to identify the presence of endogenous effects. In particular, this paper uses the interaction of intensity of social exchange with the group level adoptions to establish the presence of endogenous effects. With adequate controls, greater intensity of interaction having a bearing on technology choice can only happen when there exists social learning (endogenous effect) and cannot be associated with other forms of social effects (namely, exogenous and correlated effects). Findings - – This paper finds evidence for the existence of endogenous social effects in adoption but largely from exclusionary channels. A comprehensively mapped network is used with its intensity to explain the extremely low rate of adoption. Only close-knit networks that, with social fragmentation, limit benefits to few, affect adoption significantly. The non-functionality of less exclusionary information sources and services can be a factor underlying low adoption. Research limitations/implications - – The main limitation of the study is inability to control for unobserved individual heterogeneity because of the cross-sectional nature of data. Further, although an extensive mapping of individual networks has been done, it still cannot be guaranteed to be exhaustive. Practical implications - – With fragmentation, large-scale adoption programs would require networks, sources of information and services that are less exclusionary. Based on the survey data, media and non-religious organizations play a focal role here in the adoption of modern technology. This finding is extremely crucial for policy, as these channels comprise direct policy levers in a fragmented society like India. Indeed, several government programs in India have relied on these channels to run large-scale adoption programs. Their ineffectiveness could be a prime factor for such limited dissemination of technology in Rajasthan. Social implications - – In different settings, social fragmentation could be an important factor determining technology adoption outcomes. The evolving consensus in the literature based on several studies is that ethnic fragmentation has potentially negative consequences on macro-economic performance (Alesina and Tabellini, 1989 and Collier, 2000). In the literature on technology adoption, the role of fractionalization is somewhat under-studied. With fragmentation, there can be significant micro-level impacts (for instance, low technology adoption of a crop) if channels that are inclusive are not well developed. The finding that channels like extension services, media or organizations are not effective in determining choice of technology does not mean that they should not be tapped. The empirical findings suggest that, in their current form in the state of Rajasthan, the roles played by these are limited. The policy implications would be to develop these systems in a way that there is a greater uptake. Recall that less than 4 per cent of the respondents got information on seeds from media sources, an extremely low number. There is certainly scope for increasing the outreach of these channels that are much more important for spread of agricultural technology in a fragmented society. Originality/value - – This paper is an attempt to come up with an empirical strategy to mitigate the issues related to reflection problem. In the cross-sectional data itself, we use the interaction of group choices with intensity of interaction within the group to introduce a non-linearity that tries to bypass the identification issues as in reflection problem. This method of introducing non-linearity in cross-sectional data is a novel attempt to achieve identification of endogenous effects.

Does contract farming improve profits and food safety? Evidence from tomato cultivation in Nepal

Purpose The purpose of this paper is to quantify the benefits of contract farming (CF) on farmers’ income and adoption of food safety measures (FSMs) at the farm level. The paper also investigates the determinants of participation in CF. Design/methodology/approach The study is based on a survey of 600 tomato farmers from Nepal. Descriptive statistics, regression analysis (using instrumental variable) and propensity score matching have been used to accomplish the objectives of the study. Findings The study found that the CF ensures higher returns to farmers as well as higher adoption of FSMs at the farm level. The contract farmers earned about 38 per cent higher net returns and had 38 per cent higher adoption of FSM as compared to independent farmers. Caste, occupation, farm size and cropping intensity significantly affected farmers’ participation in CF. Research limitations/implications The analysis based on cross-section data has limitations to consider unobserved farmer-level individual heterogeneity. Originality/value This study will provide an empirical base to promote CF in Nepal. The study will also contribute to bridge the gap in literature on the drivers of CF and its impact on smallholders’ income and compliance with FSM in Nepal.