Law Commons^™

Markets And Morality, Jagdish N. Bhagwati

Faculty Scholarship

The paper addresses two issues. First, economics has evolved both as a positive science and, from moral philosophy, also as a normative discipline. Advancing the public good requires that public policy walk on both these legs. Second, the criticism has been forcefully made that markets undermine morality. This contention is refuted in several ways.

Trade And Poverty In The Poor Countries, Jagdish N. Bhagwati, T.N. Srinivasan

Faculty Scholarship

While freer trade, or “openness” in trade, is now widely regarded as economically benign, in the sense that it increases the size of the pie, the recent anti-globalization critics have suggested that it is socially malign on several dimensions, among them the question of poverty.

Their contention is that trade accentuates, not ameliorates, and that it deepens, not diminishes, poverty in both the rich and the poor countries. The theoretical and empirical analysis of the impact of freer trade on poverty in the rich and in the poor countries is not symmetric, of course. We focus here only on the …

Are We A Nation Of Tax Cheaters? New Econometric Evidence On Tax Compliance, Jeffrey A. Dubin, Michael J. Graetz, Louis L. Wilde

Faculty Scholarship

In 1982, then Commissioner of Internal Revenue Roscoe Egger reported to Congress that legal sector noncompliance with the Federal Income Tax statutes generated an "income tax gap" of $81 billion in 1981, up from $29 billion in 1973. He further projected a gap of $120 billion for 1985 (U.S. Congress, 1982). Perceptions of accelerating noncompliance inspired a crisis mentality within the Internal Revenue Service, Congress, and the tax bar.

The IRS responded in part by funding a major independent study of tax noncompliance via the National Academy of Sciences, and the American Bar Foundation initiated an investigation of its own …

The Generalized Theory Of Transfers And Welfare: Bilateral Transfers In A Multilateral World, Jagdish N. Bhagwati, Richard A. Brecher, Tatsuo Hatta

Faculty Scholarship

Paul Samuelson's (1952, 1954) classic papers on the transfer problem addressed two separate analytical issues: the "positive" effect of a transfer on the terms of trade; and the welfare effect of the transfer on the donor and the recipient.

Since then, a considerable body of literature has grown up on the positive analysis. While Samuelson (1954) himself had extended the 2 X 2 X 2 free trade analysis to allow for tariffs and transport costs, subsequent writers have analyzed other extensions of the model: for example, to allow for nontraded goods as with leisure in Samuelson (1971); or general nontraded …

The "Stationarity" Of Shadow Prices Of Factors In Project Evaluation, With And Without Distortions, Jagdish N. Bhagwati, Henry Wan Jr.

Faculty Scholarship

Until recently, the literature on cost-benefit analysis for projects has been largely within the domain of research on "public monopoly," literature currently reviewed by Jacques Lesourne, (ch. 3), and the work of public finance theorists as typified in the celebrated practical work of Ian Little and James Mirrlees in their Manual, and in the recent theoretical contribution of Peter Diamond and Mirrlees. International trade theorists have, however, turned now to the analysis of these problems, starting with the early work of Vijay Joshi and Deepak Lai, then that of W. M. Corden, and most recently culminating in the contributions of …

On Reanalyzing The Harris-Todaro Model: Policy Rankings In The Case Of Sector-Specific Sticky Wages, T.N. Srinivasan, Jagdish N. Bhagwati

Faculty Scholarship

In a brilliant and pioneering paper, John Harris and Michael Todaro introduced a model with two sectors, manufacturing (urban) and agriculture (rural), a (sticky) minimum wage in manufacturing and consequent unemployment. They also introduced a labor allocation mechanism under which, instead of the usual equalization of actual wages, the actual rural wage was equated with the expected urban wage; the latter was defined as the (sticky) minimum wage weighted by the rate of employment, so that, unlike in the standard rigid-wage models of trade theory (for example, Gottfried Haberler, Bhagwati, Harry Johnson, Louis Lefeber, and Richard Brecher), the unemployment resulting …

Exchange Control, Liberalization, And Economic Development, Jagdish N. Bhagwati, Anne O. Krueger

Faculty Scholarship

This paper highlights results of the National Bureau of Economic Research's (NBER) research project on exchange control, liberalization and economic development from 1970-1973. Initial adoption of exchange controls was generally an ad hoc response to external events. The optimal resource allocation dictum – that the marginal cost of earning foreign exchange should be equated with the marginal cost of saving foreign exchange – was generally abandoned in favor of saving foreign exchange at all costs. An export-oriented development strategy generally entails relatively greater use of indirect, rather than direct, interventions. There is considerable evidence from the individual country studies that …

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: …

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 …

More On The Equivalence Of Tariffs And Quotas, Jagdish N. Bhagwati

Faculty Scholarship

In an earlier paper on the equivalence of tariffs and quotas [1], I argued that this equivalence – defined such that a tariff would lead to a level of imports which, if alternatively set as a quota, would generate the same implicit tariff – followed from the assumptions of competitive domestic production, supply of imports, and holding of quotas. This universality of competitiveness sufficed to guarantee equivalence, as defined. It was further argued that a departure from these assumptions could, in general, destroy this equivalence and several such departures were analyzed: (1) perfect competition in domestic production replaced by pure …

International Trade And Economic Expansion, Jagdish N. Bhagwati

Faculty Scholarship

The recent literature on the effects of economic expansion on international trade has been concerned with two principal problems: the impact of the expansion on the terms of trade; and the resultant change in the welfare of the trading nations. The solutions offered, however, are not fully satisfactory. Thus H. G. Johnson [5) and W. M. Corden [3], who attempt to tackle the first problem, succeed only in establishing the direction, as distinct from the extent, of the consequential shift in the terms of trade. In so far as the full impact of the expansion on the terms of trade …