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University of Massachusetts Amherst

Economics Department Working Paper Series

2015

Articles 1 - 19 of 19

Full-Text Articles in Social and Behavioral Sciences

Profitability In India’S Organized Manufacturing Sector: The Role Of Technology, Distribution, And Demand, Deepankar Basu, Debarshi Das Jan 2015

Profitability In India’S Organized Manufacturing Sector: The Role Of Technology, Distribution, And Demand, Deepankar Basu, Debarshi Das

Economics Department Working Paper Series

Using aggregate data from the Annual Survey of Industries, we analyze profitability in India’s organized manufacturing sector from 1982-83 to 2012-13. Over the whole period of analysis, the rate of profit grew at about 1 percent per annum, primarily driven by a rising share of profits. We use structural break tests to identify medium and short run regimes. We find two medium run regimes, one of declining profitability (1982-83 to 2001-02), and another of growing profitability (2001-02 to 2012-13). We find six short run regimes, of which only two are periods of rising profitability, 1987-88 to 1996-97, and 2001-02 to …

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Non-Food Expenditures And Consumption Inequality In India, Amit Basole, Deepankar Basu Jan 2015

Non-Food Expenditures And Consumption Inequality In India, Amit Basole, Deepankar Basu

Economics Department Working Paper Series

This paper contributes to the ongoing debate about economic inequality in India during the post-reform period. We analyze consumption inequality through the hitherto neglected lens of nonfood expenditure. Using household level consumption expenditure data from the quinquennial “thick” rounds of the NSS, we show that inequality within food and non-food groups has declined, even as overall expenditure inequality has increased over time. We suggest that the rise in overall expenditure inequality is due to the increased weight in the household budget of non-food spending, which tends to be more unequal than food spending. We also show that inequality is very …

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Capital Controls And The Real Exchange Rate: Do Controls Promote Disequilibria?, Juan Antonio Montecino Jan 2015

Capital Controls And The Real Exchange Rate: Do Controls Promote Disequilibria?, Juan Antonio Montecino

Economics Department Working Paper Series

The consensus view is that capital controls can effectively lengthen the maturity composition of capital inflows and increase the independence of monetary policy but are not generally effective at reducing net inflows and influencing the real exchange rate. This paper presents empirical evidence that although capital controls may not directly affect the long-run equilibrium level of the real exchange rate, they may enable disequilibria to persist for an extended period of time relative to the absence of controls. Allowing the speed of adjustment to vary according to the intensity of restrictions on capital flows, it is shown that the real …

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Functional Finance And Intergenerational Distribution In A Keynesian Olg Model, Peter Skott, Soon Ryoo Jan 2015

Functional Finance And Intergenerational Distribution In A Keynesian Olg Model, Peter Skott, Soon Ryoo

Economics Department Working Paper Series

This paper examines the role of fiscal policy in the long run. We show that (i) dynamic inefficiency in a standard OLG model generates aggregate demand problems in a Keynesian setting, (ii) fiscal policy can be used to achieve full-employment growth, (iii) the required debt ratio is inversely related to both the growth rate and government consumption, and (iv) a simple and distributionally neutral tax scheme can maintain full employment in the face of variations in ‘household confidence’

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Is The Nature Of The Demand Regime Relevant Over The Medium Run? Revisiting Distributional Issues In A Portfolio Framework Under Different Exchange Rate Regimes, Arslan Razmi Jan 2015

Is The Nature Of The Demand Regime Relevant Over The Medium Run? Revisiting Distributional Issues In A Portfolio Framework Under Different Exchange Rate Regimes, Arslan Razmi

Economics Department Working Paper Series

Is growth in capitalist economies wage-led or profit-led? Empirical studies have found conflicting results for different countries and periods. Possible reasons may include the endogeneity of distributional shares, differences in the monetary policy/exchange rate regimes across countries, and divergence between macro behavior in the short- and medium-runs. I theoretically explore these possibilities using a portfolio balance framework to keep track of asset stocks and wealth effects over time. With fixed exchange rates, the Central Bank’s need to intervene in the asset market via official reserve transactions results in assigning a crucial role to the current account in constraining accumulation and …

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Public Debt, Secular Stagnation, And Functional Finance, Peter Skott Jan 2015

Public Debt, Secular Stagnation, And Functional Finance, Peter Skott

Economics Department Working Paper Series

Fiscal policy and public debt may be required to maintain full employment and avoid secular stagnation. This conclusion emerges from a range of different models, including OLG specifications and stock-flow consistent (post-) Keynesian models. One of the determinants of the required long-run debt ratio is the rate of economic growth. Low growth leads to high debt, and empirical correlations between growth and debt may reflect this causal effect of growth on debt, rather than negative effects of debt on growth. A second result relates directly to austerity policies. The level of government consumption and the structure of taxation influence the …

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Profitability And Investment: Evidence From India’S Organized Manufacturing Sector, Deepankar Basu, Debarshi Das Jan 2015

Profitability And Investment: Evidence From India’S Organized Manufacturing Sector, Deepankar Basu, Debarshi Das

Economics Department Working Paper Series

Using a state-industry panel data set at the 3 digit national industrial classification (NIC) level of disaggregation for 19 major Indian states over the period 1983-84 to 2007-08, we analyze the contemporaneous and long run impacts of the rate of profit and its components – profit share, capacity utilization rate, and capacity-capital ratio – on investment. Our results show that: (a) the rate of profit has both short and long run positive impacts on investment; (b) the profit share and capacity-capital ratio have only long run positive impacts, and the capacity utilization rate has only a contemporaneous positive impact on …

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Fiscal And Monetary Policy Rules In An Unstable Economy, Soon Ryoo, Peter Skott Jan 2015

Fiscal And Monetary Policy Rules In An Unstable Economy, Soon Ryoo, Peter Skott

Economics Department Working Paper Series

This paper examines the implications of different monetary and fiscal policy rules in an economy characterized by Harrodian instability. We show that (i) a monetary rule along Taylor lines can be stabilizing for low debt ratios but becomes de-stabilizing if the debt ratio exceeds a certain threshold, (ii) a `Keynesian' fiscal policy rule can stabilize the economy at full employment, (iii) a fiscal `austerity' rule that links fiscal parameters to deviations from a target debt ratio fails to adjust the `warranted' to the `natural' growth rate and destabilizes the warranted path, (iv) instability may arise from a combination of fiscal …

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Expropriation And The Location Of Farmland Investment: A Theoretical Investigation Into The Land Rush, Alfredo Rosete Jan 2015

Expropriation And The Location Of Farmland Investment: A Theoretical Investigation Into The Land Rush, Alfredo Rosete

Economics Department Working Paper Series

Accompanying a sharp rise in food prices between 2007 and 2008 were reports of land deals in the global South. The sudden rise in land acquisitions in developing countries has drawn the attention of scholars and think tanks. In particular, a set of recent papers by Deininger (2011), Deininger (2013), and Arezki et al. (2013) sought to understand the empirical determinants of the land rush. They find that investors tend to target countries that have weak land-governance institutions, understood as the degree to which local land rights are upheld. This is a puzzle, given the economic literature on investment location. …

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Growth And Distribution In Low Income Economies: Modifying Post Keynesian Analysis In Light Of Theory And History, Arslan Razmi Jan 2015

Growth And Distribution In Low Income Economies: Modifying Post Keynesian Analysis In Light Of Theory And History, Arslan Razmi

Economics Department Working Paper Series

Growth in low-income developing economies with large sectors characterized by underemployment is unlikely to be wage-led in the traditional neo-Kaleckian sense of the term. Output and employment in the sectors of the economy producing non-tradable output could be demand-led, however, and policies directly aimed at more equitable distribution in these sectors could boost long-run growth. Some of the fast growing Asian economies may have been examples of wage-led growth in this rather different sense of the term. Over time, re-distributive measures in the traditional sector, such as land reforms, could lead to faster wage and output growth across the economy.

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The Effect Of Public Health Expenditure On Infant Mortality: Evidence From A Panel Of Indian States, 1983-84 To 2011-12, Andrew Barenberg, Deepankar Basu, Ceren Soylu Jan 2015

The Effect Of Public Health Expenditure On Infant Mortality: Evidence From A Panel Of Indian States, 1983-84 To 2011-12, Andrew Barenberg, Deepankar Basu, Ceren Soylu

Economics Department Working Paper Series

Using a panel data set of Indian states between 1983-84 and 2011-12, this paper studies the impact of public health expenditure on the infant mortality rate (IMR), after controlling for other relevant covariates like per capita income, female literacy, and urbanization. We find that public expenditure on health care reduces IMR. Our baseline specification shows that an increase in public health expenditure by 1 percent of state-level GDP is associated with a reduction in the IMR by about 8 infant deaths per 1000 live births. We also find that female literacy and urbanization reduces the IMR.

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Service Sector Growth In India: A View From Households, Deepankar Basu, Debarshi Das Jan 2015

Service Sector Growth In India: A View From Households, Deepankar Basu, Debarshi Das

Economics Department Working Paper Series

This paper studies the phenomenon of service-led growth in India over the past two decades from the perspective of household expenditure. We use consumption expenditure data from four recent “thick” rounds of the National Sample Survey in 1993-94, 2004-05, 2009-10 and 2011-12, and study aggregate services as well as 5 individual categories – education, healthcare, transportation, entertainment, and personal services – for both rural India. We begin by showing that expenditures of non-rich sections of the population are, and continue to remain, a significant source of the demand that has supported growth of the service sector over the past two …

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Growth Cycles With Or Without Price Flexibility, Peter Skott Jan 2015

Growth Cycles With Or Without Price Flexibility, Peter Skott

Economics Department Working Paper Series

This note -- written in response to von Arnim and Barrales (2015) -- shows that (i) the Kaldor-Goodwin models in Skott (1989a, 1989b) and Skott and Zipperer (2012) provide good approximations to models with fast but finite adjustment of prices, (ii) the models can generate cyclical patterns that match the stylized facts, and (iii) an alternative model with instantaneous output adjustment and fixed prices produces a dynamic system that is virtually identical to the Kaldor-Goodwin; this model may describe parts of the service sector.

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The Limits To Wage-Led Growth In A Low-Income Economy, Arslan Razmi Jan 2015

The Limits To Wage-Led Growth In A Low-Income Economy, Arslan Razmi

Economics Department Working Paper Series

Neo-Kaleckian literature has actively debated whether growth is wage- or profit-led in capitalist economies. However, existing studies tend to ignore the non-tradable sector and heterogeneity within the tradable sector. This paper shows that incorporating these features renders wage-led growth in an open developing economy unfeasible in the traditional (Kaleckian) sense of the term. This result -- which follows even if one sets aside the competitiveness considerations generally seen as impeding such growth -- occurs due to the presence of a homogeneous goods-producing tradable sector that sets the ceiling to steady state growth. A corollary, in light of findings from the …

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Asymptotic Bias Of Ols In The Presence Of Reverse Causality, Deepankar Basu Jan 2015

Asymptotic Bias Of Ols In The Presence Of Reverse Causality, Deepankar Basu

Economics Department Working Paper Series

In this paper, I derive an expression for the asymptotic bias in the OLS estimator of the partial effect of a regressor on the dependent variable when there is reverse causality and all variables in the model are covariance stationary. I show that the sign of the asymptotic bias depends only on the signs of the bi-directional causal effects.

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Inequality Of Income And Wealth In The Long Run: A Kaldorian Perspective, Soon Ryoo Jan 2015

Inequality Of Income And Wealth In The Long Run: A Kaldorian Perspective, Soon Ryoo

Economics Department Working Paper Series

The paper examines the determinants of income and wealth inequality in a Kaldorian model where the profit share adjusts to clear the goods market and the long-run output-capital ratio is constant. The approach is radically different from both the mainstream approach that stresses properties of production function and the Kaleckian approach that emphasizes the long-run adjustment of utilization. The Kaldorian model is used to identify several developments that may have caused increasing inequality in income and wealth since the early 1980s, including the shift of the power relation in corporate firms in favor of top managerial pay, the decline in …

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Household Debt And Housing Bubble: A Minskian Approach To Boom-Bust Cycles, Soon Ryoo Jan 2015

Household Debt And Housing Bubble: A Minskian Approach To Boom-Bust Cycles, Soon Ryoo

Economics Department Working Paper Series

This paper examines macroeconomic dynamics of household debt and housing prices. Drawing on Minsky's insights into financial instability and cycles, our framework combines household debt dynamics with behavioral asset price dynamics in a Keynesian macro model. We show that endogenous boom-bust cycles can emerge through the interaction between household debt and housing price dynamics. The resulting long waves are combined with a Kaldorian model of short-run business cycles.

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Employment Elasticity In India And The U.S., 1977-2011: A Sectoral Decomposition Analysis, Deepankar Basu, Debarshi Das Jan 2015

Employment Elasticity In India And The U.S., 1977-2011: A Sectoral Decomposition Analysis, Deepankar Basu, Debarshi Das

Economics Department Working Paper Series

This paper analyses the phenomenon of jobless growth in India and the US through the lens of employment elasticity. Analytical results are derived for decompositions of both the level and change of aggregate employment elasticity in terms of sectoral elasticities, relative growth and employment shares. Estimates of these decompositions are presented with employment and output data from relevant sources for both economies. In India, the agricultural sector was the key determinant of both the level and change of aggregate elasticity till the early 2000s. In USA, services is the most important determinant of the level of, but manufacturing remains an …

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A Selective Review Of Recent Quantitative Empirical Research In Marxist Political Economy, Deepankar Basu Jan 2015

A Selective Review Of Recent Quantitative Empirical Research In Marxist Political Economy, Deepankar Basu

Economics Department Working Paper Series

This paper surveys some of the quantitative empirical research in two areas of Marxist political economy: (a) Marxist national accounts, and (b) Marxist responses to the Sraffa-based critique of the 1970s. With respect to the first area, this paper explains the basic methodology underlying the construction of Marxist national accounts from traditional input-output data. With respect to the second area, it offers a short review of the theoretical literature surrounding the Sraffa-based critique of the 1970s, and subsequently discusses three Marxist responses in detail: the standard interpretation, the probabilistic interpretation and the new interpretation. It explains the basic theoretical positions …

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