Kunal Sen

Trade Liberalization and Productivity Growth: Evidence from Indian Manufacturing

The impact of trade liberalisation on productivity growth is still an empirical issue; the theoretical literature is as yet unclear on the direction of any such association. This paper develops an analytical framework and employs it to empirically test if trade liberalisation in Indian manufacturing has raised total factor productivity (TFP) growth. The answer is in the affirmative. Our results also support a key postulate of the new growth theories that liberalisation of the intermediate good sectors has a larger favourable impact on TFP growth than that of the final good sectors. (This abstract was borrowed from another version of this item.)

Poverty in Rural India: Caste and Tribe

This paper analyzes the determinants of rural poverty in India, contrasting the situation of scheduled caste (SC) and scheduled tribe (ST) households with the non-scheduled population. The incidence of poverty in SC and ST households is much higher than among non-scheduled households. By combining regression estimates for the ratio of per capita expenditure to the poverty line and an Oaxaca-type decomposition analysis, we study how these differences in the incidence of poverty arise. We find that for SC households, differences in characteristics explain the gaps in poverty incidence more than differences in transformed regression coefficients. In contrast, for ST households, differences in the transformed regression coefficients play the more important role.

Equity market linkages in the Asia Pacific region: A comparison of the orthogonalised and generalised VAR approaches

Abstract This study provides an empirical analysis of the linkages between markets, and the efficiency with which innovations between markets are transmitted in the Asia Pacific region, using two competing methodologies. Specifically, this study compares the generalised approach to forecast error variance decomposition and impulse response analysis to the more traditional orthogonalised approach. The findings of this study confirm earlier studies that show the Asia Pacific region to be characterised by informationally efficient equity markets, with a number of these markets showing strong linkages. More significantly, the generalised vector autoregression (VAR) approach is shown to give more realistic results, particularly for those markets with the closest geographical and economic links.

What has luck got to do with it? A regional analysis of poverty and agricultural growth in rural India

This article explores the role of agro-ecological factors associated with agricultural growth and poverty outcomes in India. Using a new operationalisation of agro-ecological factors and incorporating within-State variations in poverty and other variables we show that agricultural growth and poverty reduction appear to depend on underlying agro-ecological conditions which are favourable to the spread of irrigation and hence agricultural development, which in turn in associated with poverty reduction. Promotion of agriculture in less favoured areas in unlikely to have similar effects on agriculture in less favoured areas is unlikely to have similar effects on agricultural growth even if the effects of agricultural growth on poverty remain similar, unless conditions for irrigation are favourable or rainfall is sufficiently abundant and reliable. This suggests that considerable caution may be needed in drawing policy conclusions from empirical analysis by state alone, and without regard to their underlying factor endowments.

State Business Relations and Economic Growth in Sub-Saharan Africa

Abstract This paper contributes to the literature on the determinants of economic growth in sub-Saharan Africa by examining the effect of effective state-business relations on economic growth for a panel of 19 sub-Saharan African countries for the period 1970–2004. We propose a measure that we argue captures the various dimensions of effective state–business relations in sub-Saharan Africa. We then estimate standard growth regressions using dynamic panel data methods with this measure, along with the more conventionally used measures of institutional quality such as degree of executive constraints, the rule of law, the degree of corruption and the quality of the bureaucracy. Our results show that effective state–business relations contribute significantly to economic growth – countries which have shown improvements in state–business relations have witnessed higher economic growth, controlling for other determinants of economic growth and independent of other measures of institutional quality.This paper contributes to the literature on the determinants of economic growth in sub-Saharan Africa by examining the effect of effective state-business relations on economic growth for a panel of 19 sub-Saharan African countries for the period 1970-2004. We propose a measure that we argue captures the various dimensions of effective state-business relations in sub-Saharan Africa. We then estimate standard growth regressions using dynamic panel data methods with this measure, along with the more conventionally used measures of institutional quality such as degree of executive constraints, the rule of law, the degree of corruption and the quality of the bureaucracy. Our results show that effective state-business relations contribute significantly to economic growth - countries which have shown improvements in state-business relations have witnessed higher economic growth, controlling for other determinants of economic growth and independent of other measures of institutional quality.

The Puzzling Decline in Rural Women’s Labor Force Participation in India: A Reexamination

Between 2004/2005 and 2009/2010 there was a sharp fall in female labor force participation (LFP) in rural India. Why did this occur? We look at the four standard explanations: that more women in rural areas are now pursuing higher education and are therefore not available for work (education effect), that household incomes are rising quickly enough that there is a tendency for women to withdraw from the labor force to attend to domestic duties (income effect), that employment opportunities for women are decreasing, and that social and cultural factors may be interacting with these three factors and amplifying their effects. Our findings suggest that the decline in rural women’s LFP could potentially be due to an income effect and partly due to an education effect. We find no evidence of changes in employment opportunities or of social and cultural interaction effects that could explain the decline in rural female LFP.

International Trade and Manufacturing Employment in the South: Four Country Case Studies

This paper investigates the impact of international trade on manufacturing employment in developing countries, by undertaking a comparative study of four countries—Bangladesh, Kenya, South Africa and Vietnam. It does so by employing a variety of methodological approaches: factor content; growth accounting; and econometric modelling. The main empirical finding is that international trade seems to be associated with the net creation of jobs in Bangladesh and Vietnam, with female workers being the key beneficiaries. In contrast, international trade has been associated with adverse employment outcomes in Kenya, and possibly in South Africa. This suggests that there may be crucial differences between Asia and Africa in terms of the impact of globalization on employment opportunities in manufacturing. Some alternative explanations for such differences are offered in the paper.

Job Recruitment Networks and Migration to Cities in India

Abstract Economists have focused on job search and supply-side explanations for network effects in labour transactions. This paper develops and tests an alternative explanation for the high prevalence of network-based labour market entry in developing countries. In our theoretical framework, employers use employee networks as screening and incentive mechanisms to improve the quality of recruitment. Our framework suggests a negative relationship between network use and the skill intensity of jobs, a positive association between economic activity and network use and a negative relationship between network use and pro-labour legislation. Furthermore, social identity effects are expected to intensify when compared to information-sharing and other network mechanisms. Using data from an all-India Employment Survey, we implement a novel empirical strategy to test these relationships and find support for our demand-side explanation.

International Trade and Manufacturing Employment: Is India following the Footsteps of Asia or Africa?

The Indian manufacturing sector has rapidly increased its integration with the world economy since the 1991 trade reforms. We examine whether trade integration created or destroyed jobs in the Indian manufacturing sector, and compare Indias employment outcomes with four other countries—Bangladesh, Kenya, South Africa, and Vietnam. We find that the impact of international trade on manufacturing employment seems to be similar to those found for the two African countries rather than the two Asian countries, a surprising result for a country with an apparent comparative advantage in labor-intensive manufacturing goods, and a large excess supply of unskilled labor.

The Determination of Industrial Prices in India: A Post Keynesian Approach

One of the well-established empirical findings about industrial prices in India is that cost push factors have a greater influence than demand pull factors (see Bhattacharya and Lodh, 1990). As a consequence of this finding, the structuralist theory of inflation, which emphasizes cost-side variables, is usually taken to characterize the data-generating process of industrial price behavior in India. Structuralists (such as Taylor, 1983, and Balakrishnan, 1991) argue that inflation occurs because of structural bottlenecks in the agricultural sector. Sectoral imbalances (caused by rapid growth of the industrial sector) lead to an excess demand for agricultural goods and, consequently, a rise in agricultural commodity prices. The increase in raw material prices and the indexation of money wages to the consumer price index results in the transmission of the rise in agricultural prices to industrial prices as firms simply pass on the increase in costs to the consumers. Therefore, structuralists argue that the ultimate cause of inflation in industrial prices can be traced to the agricultural sectorthere could be no autonomous developments within the industrial sector that would lead to an increase in industrial prices. A major limitation in the literature has been that there has been no consideration of other theoretical frameworks that also take prices to be cost-determined but that differ from the structuralists in the manner in which they explain industrial inflation. An important theoretical framework that has not been yet considered is the Post Keynesian framework, which argues, like the structuralists, that prices are essentially cost-de-