Raveendra N. Batra

Competitive Firm and the Theory of Input Demand under Price Uncertainty

In this paper, we examine the behavior of the competitive firm faced with making input-hiring decisions under conditions of price uncertainty. Unlike Sandmo and Baron, among others, we show categorically that a marginal increase in uncertainty stimulates a decline in the firms output, provided the absolute risk aversion is decreasing. Furthermore, the implications of a change in expected price remain unchanged, but those of a change in input price need not be the same as in the certainty case. Specifically, the input demand function is downward sloping only if the production function is well behaved.

A synthesis of the Heckscher-Ohlin and the neoclassical models of international trade

Abstract In this paper we provide a synthesis between the neoclassical and the Heckscher-Ohlin models of international trade by developing the properties of a two-sector, three-factor model. The neoclassical model, where one or more factors are specific to one or both industries, and the Heckscher-Ohlin model, where two (or all factors) are nonspecific, then can be analyzed as special cases of our model. The theorems by Rybczynski, Stolper and Samuelson, Jones and Chipman, among others, are reexamined in terms of our generalized model.

Resource allocation in a general equilibrium model of production under uncertainty

Abstract The purpose of this paper is to examine the implications of uncertainty for resource allocation, real income, and income distribution in terms of a simple two-sector general equilibrium model of a small country where uncertainty is introduced by assuming that production in one sector occurs in a stochastic environment. Assuming decreasing risk aversion, we show that an increase in uncertainty causes the movement of the resources away from the uncertain sector, a decline in expected real income, and a shift in the distribution of income against the factor employed intensively by the uncertain sector.

Urban Unemployment and the Gains from Trade

A welfare ranking of alternative commercial policies is constructed for the mobile capital Harris-Todaro economy. It is sh own that, despite the presence of unemployment, most noninterventioni st policies suggested by the competitive model of gains from trade ca rry over to the mobile capital Harris-Todaro economy. Yet in contradi ction to the competitive model, it is shown that all forms of trade i ntervention are not detrimental to welfare. Only those that reduce th e volume of trade are. The export promotion policies so copiously fol lowed by developing countries are vindicated, but their import substi tution policies are shown to be without justification. Copyright 1987 by The Review of Economic Studies Limited.

Gains from Trade Under Uncertainty

No treatise on the theory of international trade can be considered complete without some discussion of the subject of the gains from trade. Accordingly, this chapter is devoted to a dissection of the anatomy of gains from trade in a stochastic environment. In other words, unlike the earlier chapters which were primarily concerned with positive aspects of trade theory under uncertainty, the present chapter will deal with the welfare or normative aspects of international trade, although it would be fair to say that some sections of the foregoing chapters did investigate the normative aspects as well. The study of the implications of commodity-price-stabilisation policies for the allocative efficiency of the economic system, after all, does have some welfare connotations.

Unemployment, tariffs and the theory of international trade

Abstract In this paper, we introduce diminishing returns to scale in Brechers model of international trade with unemployment and then investigate some issues embodied in the theory of international trade. Our principal results are that tariffs need not improve a countrys terms of trade and that capital accumulation also need not result in a predictable change in the terms of trade.

Pattern of trade between underemployed economies

In this paper, the authors analyze the factors determining the pattern of trade between underemployed economies. They find, among other things, that a low-wage, land-abundant country exports the land-using, labor-intensive product to a high-wage, capital-abundant country. The authors also find conditions under which a high-wage, capital-rich country may export the labor-intensive product (the Leonteif paradox). Copyright 1990 by The London School of Economics and Political Science.

A general equilibrium model of the incidence of corporation income tax under uncertainty

Abstract In this paper we investigate the incidence of the corporation income tax in terms of a two-sector, general equilibrium model, where production decisions are made under uncertainty. The conventional result, derived originally by Harberger (1962), is that if the corporate sector is the capital-intensive sector, then capital must bear a greater burden of the tax, in proportion to its initial share in national income, than labor. This result continues to hold unambiguously under uncertainty only if the relative and the absolute risk aversion of the corporations are non- increasing in profits. Otherwise, the Harberger result may not hold.

Customs union and unemployment in LDCs

Abstract Welfare effects of customs union are examined for a small open economy with unemployment of labor of Harris-Todaro type and some new results are reported. Specifically, it is demonstrated that for LDCs afflicted with urban unemployment, trade-creating customs union continues to be an effective policy.

Imported technologies, urban unemployment and the North-South dialogue

Abstract This paper extends the Harris-Todaro model with intersectoral capital mobility to include sector specific imported technologies. Technologies are assumed to be embodied in imported capital goods. The small economy in the South, for which the model is defined, can import any amount of these technologies from the North at given royalty rates. We find that if the North agrees to reduce the royalty rate on the industrial technology, both the level and the rate of urban unemployment would rise and the income distribution change against the wage earners, whereas such a reduction for the agricultural technology would have just the opposite effects. A decrease in either royalty rate would increase the national income in the South, although the magnitude of the increase in income would be larger with reduced royalty rate for agricultural rather than industrial technology. The policy implication is that the South should emphasize the import of agricultural technology over the industrial technology.