Shubhashis Gangopadhyay

Toward a theoretical model of voluntary overcompliance

Abstract We explain why some firms voluntarily overcomply with environmental regulation. In our model all consumers value environmental quality but differ in their willingness to pay which depends on their income levels. Publicly available information on environmental performance of firms enables consumers to identify clean firms. Firms participate in a two-stage duopoly game where they first choose their levels of cleaning technology and next engage in price competition. The market gets segmented by income levels. A minimum standard binding on the dirty firm has the effect of improving the performance of the cleaner firm. A subsidy obtains the same competitive outcome.

Tax/subsidy policies in the presence of environmentally aware consumers ☆

Abstract We study policy measures to improve environmental quality in the presence of environmentally aware consumers. We consider two sets of policy instruments—uniform policies for the firms and policies that discriminate between the firms based on their environmental quality. For the latter set, either the better performer is rewarded with a subsidy or, the worse performer is punished with a tax. We find that while a uniform subsidy policy improves average environmental quality, a uniform tax policy worsens it. Further while a discriminatory subsidy policy reduces total pollution and enhances aggregate welfare, a discriminatory tax policy may increase total pollution and may reduce aggregate welfare.

Joint Liability Lending and the Peer Selection Effect

We show that the joint liability lending contracts derived in Ghatak (2000) violate an ex post incentive-compatibility constraint which says that the amount of joint liability cannot exceed the amount of individual liability. We derive and characterise optimal separating joint liability contracts incorporating this constraint.

Export Bans, Environmental Protection, and Unemployment

This study investigates the case for an export ban on intermediate goods which generate environmental damage. Since export restrictions on intermediates have long been advocated as a method of stimulating domestic industries in developing countries, we consider whether the case for an export ban is strengthened or weakened by the presence of unemployment in the industrial sector. We find that, in the short run, an export restriction worsens unemployment, thus weakening the case for a ban. In the long run, however, the results are reversed. If the environmental problem is severe, unemployment has a negligible impact on the case for an export ban. Copyright 1997 by Blackwell Publishing Ltd

Occupational Structure and Incidence of Poverty in Indian Towns of Different Sizes

This paper investigates the incidence of poverty in Indian towns and cities of various sizes of population. It also tests the hypothesis that larger towns and cities, because of their size, are capable of supporting more complex economic activities, improving labor productivity, and hence lowering the incidence of poverty. In particular, similar levels of education, ceteris paribus, have a larger impact in bigger conurbations.

A Model of the Informal Sector in Development

In discussions of economic development, industrial dualism is often ignored. Industry, or the modern sector, in developing countries is composed of an overregulated formal sector and a free-entry informal sector. Because of the nature of the regulations we can, in general, identify the formal sector with large industry and the informal sector with small industry. The informal modern sector is often a dynamic actor in the process of economic development, frequently outpacing the growth of the formal modern sector. We investigate in a general equilibrium model the conditions under which the informal sector increases its capital stock more rapidly than the formal sector. We also look at the employment-unemployment effects of industrial dualism.

Reforms and Entry: Some Evidence from the Indian Manufacturing Sector

Traditional research in the context of product market entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry, and have identified industry-specific factors that affect entry rates. However, following de Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using three-digit industry-level data from India, for the 1984–97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry-level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post-1991 reforms, variations in entry rates during the 1990s were explained largely by state-level institutional and legacy factors. Past productivity growth affects net entry rates as well.

Avoiding bank runs in transition economies: The role of risk neutral capital

In a general equilibrium model with risk neutral and risk averse agents, we show that if banks issue both demand deposits and equity, then free banking is run-proof and efficient. In particular, we obtain the first best insurance solution if there is adequate risk neutral capital. If sufficient risk neutral capital is unavailable, then a partial suspension of convertibility is optimal. In general, therefore, policies like capital adequacy norms and deposit insurance are neither necessary nor desirable.

Reforms, entry and productivity: Some evidence from the Indian manufacturing sector

It is now stylized that, while the impact of ownership on firm productivity is unclear, product market competition can be expected to have a positive impact on productivity, thereby making entry (or contestability of markets) desirable. Traditional research in the context of entry has explored the strategic reactions of incumbent firms when threatened by the possibility of entry. However, following De Soto (1989), there has been increasing emphasis on regulatory and institutional factors governing entry rates, especially in the context of developing countries. Using 3-digit industry level data from India, for the 1984-97 period, we examine the phenomenon of entry in the Indian context. Our empirical results suggest that during the 1980s industry level factors largely explained variations in entry rates, but that, following the economic federalism brought about by the post-1991 reforms, variations entry rates during the 1990s were explained largely by state level institutional and legacy factors. We also find evidence to suggest that, in India, entry rates were positively associated with growth in total factor productivity.

Market equilibrium under the 'threat' of a VER

Abstract This paper characterizes market equilibrium under oligopoly, when a VER has introduced both asymmetry amongst exporters, and uncertainty. A restrained and an unrestrained exporter choose price strategically, under the ‘threat’ of a VER on the latter. A pure strategy equilibrium is shown to result only when the probability of the VER is high. Otherwise a unique mixed strategy equilibrium results. As the probability of the VER rises, the expected domestic price rises, even if the VER is not imposed.