Shubham Chaudhuri

Household Production and Environmental Kuznets Curves – Examining the Desirability and Feasibility of Substitution

This paper provides a theoretical explanation for the widely debatedempirical finding of “Environmental Kuznets Curves”, i.e., U-shaped relationships between per-capita income and indicators of environmentalquality. We present a household-production model in which the degradationof environmental quality is a by-product of household activities. Householdscan not directly purchase environmental quality, but can reduce degradation by substituting more expensive cleaner inputs to production for less costlydirty inputs. If environmental quality is a normal good, one expectssubstitution towards the less polluting inputs, so that increases in incomewill increase the quality of the environment. It is shown that this onlyholds for middle income households. Poorer households spend all income on dirty inputs. When they buy more, as income rises, the pollution also rises.they do not want to substitute, as this would reduce consumption ofnon-environmental services for environmental amenities that are alreadyabundant. Thus, as income rises from low to middle levels, a U shape can result. Yet an N shape might eventually result, as richer households spend all income on clean inputs. Further substitution possibilities are exhausted.Thus as income rises again pollution rises and environmental quality falls.

The Plasticity of Participation: Evidence from a Participatory Governance Experiment

Under the “People’s Campaign for Decentralised Planning,” initiated by the government of the Indian state of Kerala in 1996, significant planning and budgetary functions that had previously been controlled by state-level ministries, were devolved to the lowest tier of government— municipalities in urban areas, and gram panchayats (village councils) in rural areas. A key element of the campaign was the requirement that every gram panchayat organize open village assemblies—called Gram Sabhas—twice a year through which citizens could participate in formulating planning priorities, goals and projects. Using data from the first two years of the campaign, on the levels and composition of participation in the Gram Sabhas in all of Kerala’s 990 gram panchayats we empirically assess the explanatory power of the dominant existing paradigms of participation—social capital, rational choice, and social-historical. The basic patterns we document, as well as our more detailed analyses of the impact that a range of spatial, socioeconomic and political factors had on the levels and social depth of participation, provide broad support for a dynamic and contingent view of participation, a perspective that recognizes the “plasticity of participation.” ∗ We are indebted to the Kerala State Planning Board and in particular to Board member T.V. Thomas Isaac for providing us access to the data we use in this paper. During research trips in 1996, 1999, 2001 and 2002, in addition to obtaining these data, we conducted multiple interviews with key officials, civil society activists and Planning Board Members, visited several gram panchayats and attended numerous Gram Sabhas. Funding for these trips was provided by the Institute for Social and Economic Research and Policy at Columbia University. With funding from the Ford Foundation in India, and in collaboration with the Centre for Development Studies in Thiruvananthapuram, Kerala, we are currently conducting an intensive survey of 85 randomly selected panchayats, including over 900 interviews with key respondents. For details see Chaudhuri, Heller and Mukherjee (2001).

Economic growth and the environment: What can we learn from household data?

The fuel-use decisions of households in developing economies, because they directly influence the level of indoor air quality that these households enjoy (with its attendant health effects), provide a natural arena for empirically assessing latent preferences towards the environment and how these evolve with increases in income. Such an assessment is critical for a better understanding of the likely effects of aggregate economic growth on the environment. Using household data from Pakistan we estimate Engel curves for traditional (dirty) and modern (clean) fuels. Our results provide empirical support for the household choice framework developed in Pfaff, Chaudhuri and Nye (2002a), which suggests that even if environmental quality is a normal good, non-monotonic environmental Engel curves can arise. Under plausible assumptions about the emissions implied by fuel use, our estimates yield an inverted-U relationship between indoor air pollution and income, mirroring the environmental Kuznets curves that have been documented using aggregate data. We then demonstrate, through a simple voting model, that this household-choice framework can generate aggregate EKCs even in a multi-agent setting with heterogeneous households and purely external environmental effects. JEL codes: D11, H41, O12, Q25 ∗We would like to thank the World Bank and the Pakistan Federal Bureau of Statistics for allowing us access to the Pakistan Integrated Household Survey data. We would also like to thank Steve Cameron and Matt Kahn, as well as participants at AEA, NBER, NEUDC and Harvard Environmental Economics and Policy seminars for comments. Corresponding author: Shubham Chaudhuri, Columbia University MC-3308, New York, NY 10027. E-mail: sc301@columbia.edu.

The effects of extending intellectual property rights protection to developing countries: A case study of the Indian pharmaceutical market

Under the TRIPS agreement, WTOmembers are required to enforce product patents for pharmaceuticals. The debate about the merits of this requirement has been and continues to be extremely contentious. Many poor developing economies claim that patent protection for pharmaceuticals will result in substantially higher prices for medicines, with adverse consequences for the health and well-being of their citizens. On the other hand, research-based global pharmaceutical companies, which claim to have lost billions of dollars because of patent infringement, argue that prices are unlikely to rise significantly because most patented products have therapeutic substitutes. In this paper we empirically investigate the basis of these claims. Central to the ongoing debate is the structure of demand for pharmaceuticals in poor economies where, because health insurance coverage is so rare, almost all medical expense are met out-of-pocket. Using a product-level data set from India, which is unique in terms of its detail and coverage, we estimate key price and expenditure elasticities and supply-side parameters for the fluoroquinolones sub-segment of the systemic anti-bacterials (i.e., antibiotics) segment of the Indian pharmaceuticals market. We then use these estimates to carry out counterfactual simulations of what prices, profits (of both domestic firms and multinational subsidiaries) and consumer welfare would have been, had the fluoroquinolone molecules we study been under patent in India as they were in the U.S. at the time. Our results suggest that concerns about the potential adverse welfare effects of TRIPS may have some basis. We estimate that in the absence of any price regulation or compulsory licensing, the total annual welfare losses to the Indian economy from the withdrawal of the four domestic product groups in the fluoroquinolone sub-segment would be on the order of U.S.

Some Simple Analytics of Trade and Labor Mobility

713 million, or about 118% of the sales of the entire systemic antibacterials segment in 2000. Of this amount, foregone profits of domestic producers constitute roughly

Endowments, preferences, technologies and abatement: growth-environment microfoundations

50 million (or 7%). The overwhelming portion of the total welfare loss therefore derives from the loss of consumer welfare. In contrast, the profit gains to foreign producers are estimated to be only around

Mobility costs and the dynamics of labor market adjustment to external shocks: Theory

57 million per year. JEL Codes: O34, D12, D4, L65, F13 ∗Comments welcome. We would like to thank Isher Ahluwalia, former Director, Indian Council for Research on International Economic Relations for providing us with access to the primary data used in this study. We also thank seminar participants at Yale and the 2003 NEUDC conference for helpful comments.

Why might one expect environmental Kuznets curves? Examining the desirability and feasibility of substitution

We study a simple, tractable model of labor adjustment in a trade model that allows us to analyze the economys dynamic response to trade liberalization. Since it is a neoclassical market-clearing model, we can use duality techniques to study the equilibrium, and despite its simplicity a rich variety of properties emerge. The model generates gross flows of labor across industries, even in the steady state; persistent wage differentials across industries; gradual adjustment to a liberalization; and anticipatory adjustment to a pre-announced liberalization. Pre-announcement makes liberalization less attractive to export-sector workers and more attractive to import-sector workers, eventually making workers unanimous either in favor of or in opposition to liberalization. Based on these results, we identify many pitfalls to conventional methods of empirical study of trade liberalization that are based on static models.

Endowments, preferences, abatement and voting: Microfoundations of environmental Kuznets curves

Will economic growth inevitably degrade the environment, throughout development? We present a household-level framework emphasising the trade-off between consumption that causes pollution and pollution-reducing abatement. Our model provides a simple explanation for upward-turning, non-monotonic paths of environmental quality during economic growth. Its innovation yields sufficient conditions that simultaneously address preferences and technologies. With standard preferences, an asymmetric endowment (i.e., at zero income, consumption is also zero but environmental quality is positive) leads low-income households not to abate, and further this condition is sufficient for an environmental Kuznets curve (EKC) for a wide range of abatement technologies. Without such an endowment, however, even strong economies of scale in abatement are, on their own, insufficient for an EKC.

Risk and Insurance in Village India: Comment

We construct a dynamic, stochastic rational expectations model of labor reallocation that is designed so that its key parameters can be estimated for trade policy analysis. A key feature is the presence of time-varying idiosyncratic moving costs faced by workers. As a consequence of these shocks: (i) gross flows exceed net flows (an important feature of empirical labor movements); (ii) the economy features gradual and anticipatory adjustment to aggregate shocks; (iii) wage differentials across locations or industries can persist in the steady state; and (iv) the normative implications of policy can be very different from a model without idiosyncratic shocks, even when the aggregate behavior of both models is similar. It is shown that the solution to a particular planner’s problem yields a competitive equilibrium, thus facilitating the analysis and simulation of the model for policy purposes.