Nirvikar Singh

Price and quantity competition in a differentiated duopoly

This article analyzes the duality of prices and quantities in a differentiated duopoly. It is shown that if firms can only make two types of binding contracts with consumers, the price contract and the quantity contract, it is a dominant strategy for each firm to choose the quantity (price) contract, provided the goods are substitutes (complements).

Information Technology and Broad-Based Development: Preliminary Lessons from North India

Can information technology (IT) contribute to broad economic development? Can the benefits of IT reach the poor, through better access to education or to government services? We examine two ongoing projects that aim to provide IT-based services to rural populations in India. Several features distinguish these projects from others: a combination of public and private efforts, and goals of commercial sustainability. We draw lessons from comparing different approaches in similar localities. While the goals of the two organizations studied are similar, we identify some important differences in implementation that may have more general implications for the success of such projects.

Exports and growth : Critical minimum effort and diminishing returns

Abstract This paper provides some extensions and qualifications concerning the empirical evidence for the positive impact of exports on growth, using a model of Feder. In particular, the ideas of ‘critical minimum effort’ and ‘diminishing returns’ with respect to the export sector are given some empirical support.

Indian Federalism, Economic Reform and Globalization

In this paper we examine several dimensions of economic reform in India, in the context of the country’s federal system and of globalization, i.e., we explicitly recognize that the national government has subnational governments below it, and that all these layers of government simultaneously interact with foreign governments and corporations in a global economy. We examine two groups of reforms, the first involving redrawing of state-market boundaries, and the second concerned with reconfiguring federal institutions themselves. The first group includes financial sector reforms, assignment of regulatory powers, infrastructure reform and development, and privatization. We note the progress made in financial sector reform but also the problems caused for the financial sector as a whole by state and central fiscal deficits. We discuss the extreme problems of the power sector, and the important federal dimensions that make reform more difficult there. We also highlight the regional concentration of FDI in India’s more liberalized economy. The second group of reforms includes tax reforms, reform of center-state fiscal transfer mechanisms, and local government reforms. To some degree, these reforms in federal governance hold the key to opening the door to further reform elsewhere, by reducing the fiscal burden placed on the private sector by government deficits. We acknowledge the political economy aspects of reform of governance, and discuss possibilities for politically acceptable packages of fiscal reforms, such as combinations of changes in tax assignment that would be acceptable to the center as well as the state governments. We also discuss the possibility that growing regional inequalities might require the intergovernmental transfer system to be more efficient and effective in its objectives.

Impediments and Innovation in International Rivers: The Waters of South Asia

Abstract International cooperation over the major rivers in South Asia has recently become much closer. Five agreements, signed in 1996 and 1997 against a background of greater regional economic and nongovernmental contact, could facilitate significant progress to mitigate flooding and drought, to provide a basis for greater regional cooperation, and to sustain irrigation expansion and industrial development. This paper identifies past impediments to cooperation. It examines how new agreements seem to offer negotiation on a wider range of issues than previously, and to expand the range of potential negotiating bodies beyond national governments to include subnational governments, private corporations, and nongovernmental organizations.

Regional Inequality in India: A Fresh Look

There are concerns that regional inequality in India has increased after the economic reforms of 1991. This concern is supported by various statistical analyses. In this paper, we show that the conclusions are sensitive to what measures of attainment are used. In particular, human development indices do not show the same increase in regional inequality. Furthermore, looking at consumption and credit indicators for regions disaggregated below the state level also suggests that inequality trends may not be as bad as suggested by State Domestic Product data, although the greater strength of the economies of the western and southern states emerges in our results. Finally, we briefly discuss policy implications within the context of India’s evolving federal polity.

Exports, Non-Exports and Externalities: A Granger Causality Approach

Illustrated within the context of a dynamic form of the neoclassical two-sector growth model, we show that existing empirical studies may not detect potentially significant externality effects associated with expansion of the export sector because of declining marginal productivity differentials. A time series empirical methodology analyzing the interactions of the non-export sector and export sector is suggested which avoids this problem and isolates potential externality effects. Time series analy- sis gives results generally favorable to the existence of significant positive externality effects running from export growth to non-export output growth for a significant number of developing economies. [F 11]

Services-Led Industrialization in India: Assessment and Lessons

This paper provides an integrated analysis of the role of the service sector in recent Indian economic development. It discusses the nature of services, their distinction from products, and their categorization. It provides an overview of India’s overall growth experience, and a detailed examination of the contribution of the service sector to growth. It includes an examination of the potential for spillovers from IT, ITES and other service sectors such as financial services, to the rest of the economy, drawing on econometric work, as well as input-output analysis of linkages to understand these possible spillovers and growth potentials. Based on this evidence, it appears that India’s manufacturing sector development may have been constrained in part by weaknesses in key service sectors such as transportation and electricity. The paper also considers the particular role of international trade in services, which is of growing importance. It discusses the consequences for employment of different growth paths, the challenges of education and manpower training to support and sustain India’s development path, and social and environmental issues, including regional inequality issues. The Indian experience is related to recent discussions of industrial policy, and development policy more generally.

Entry-Deterrence in Stackelberg Perfect Equilibria

This paper examines entry deterrence in a duopoly where the postentry game is Stackelberg. It is argued that, in reality, firms can use a broader range of precommitments than is allowed for in the literature. This paper permits such precommitments and analyzes the perfect equilibria. It also allows for the fact that there may be fixed costs associated not only with entry, but with beginning production. Several interesting possibilities are explained, including the existence of excess capacity and the holding of inventories even in the absence of any uncertainty. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

India’s Trilemma: Financial Liberalisation, Exchange Rates and Monetary Policy

A key challenge for macroeconomic policy in open economies is how to simultaneously manage exchange rates, interest rates and capital account openness – the trilemma. This study calculates a trilemma index for India and investigates its evolution over time. We find that financial integration has increased markedly after the mid‐2000s, with corresponding limitations on monetary independence (MI) and exchange rate stability (ES). In addition, we empirically confirm that a rise in one trilemma variable is traded off with a drop in the weighted sum of the other two, i.e. the trilemma configuration is binding in India. Finally, we consider the implications of changes in the trilemma index for macroeconomic outcomes. We find that greater MI systemically contributes to lower inflation, so the twin goals of ES and capital account openness may create policy dilemmas in particular economic environments. ES is associated with less inflation volatility, suggesting that there may be secondary benefits channelled through import and commodity prices. In these relationships, however, changes in international reserves are not statistically significant, suggesting that foreign exchange market intervention has not mitigated the trilemma trade‐off in India.