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Contributions To Indian Economic Analysis: A Survey, Jagdish N. Bhagwati, Sukhamoy Chakravarty

Faculty Scholarship

Any survey of contributions to economic analysis in India, even though confined to the post-war years and to issues arising from domestic economic events and policy, runs into exceptional difficulties. Not only has practically every conceivable problem been raised and discussed by economists, in a country where interest in economic issues dates back at least to the latter half of the 19th century; but there have also been numerous committees and commissions whose report have led to a voluminous literature.

Ruthless selectivity has thus been inevitable. We have generally focussed, in this survey, on contributions which meet the following criteria: …

Domestic Distortions, Tariffs, And The Theory Of Optimum Subsidy: Some Further Results, Jagdish N. Bhagwati, V.K. Ramaswami, T.N. Srinivasan

Faculty Scholarship

Bhagwati and Ramaswami (1963) showed that if there is a distortion, the Paretian first-best policy is to intervene with a tax (subsidy) at the point at which the distortion occurs. Hence a domestic tax-cum-subsidy with respect to production would be first-best optimal when there was a domestic distortion (defined as the divergence between domestic prices and the marginal rate of transformation in domestic production) just as a tariff policy would be first-best optimal under monopoly power in trade (which involves a foreign distortion). An important corollary, for the case of a distortionary wage differential, is that while a tax-cum-subsidy policy …

Optimal Policies And Immiserizing Growth, Jagdish N. Bhagwati

Faculty Scholarship

In 1958, I analysed the paradoxical case of "immiserizing growth" [2] where a country, with monopoly power in trade, found that the growth-induced deterioration in its terms of trade implied a sufficiently large loss of welfare to outweigh the primary gain from growth. An obvious corollary of this proposition was that, if the country imposed an optimum tariff (either in both the pre-growth and the post-growth situations, or in the latter situation alone), this paradox would be eliminated.

James Melvin, in an interesting note [5], has now produced yet another analysis of immiserizing growth, where demand differences of the factor-intensity-reversals …