59 research outputs found
Private versus Public Monopoly
No full textTop incomes in India have been rising sharply since the 1980s. In this chapter, we show that this phenomenon may have resulted in delays to female marriage. Our analysis takes advantage of cross-sectional variation in earnings distribution across narrowly defined marriage markets. We find that female marriage rates decline in response to increases in top male incomes. We also find marked effects on women’s educational attainment (in terms of years of schooling, as well as high school and college completion rates). We examine a number of hypotheses, and conclude that the pattern of results suggests a mechanism in which increases in top male incomes prolong the duration of marital search on the part of women
Inequality and Neighbourhood Effects
No full textThe key insight in our research is to recognize inequality–neighbourhood interaction: neighbourhood effects interacting with income inequality may affect poor people’s ability to access basic facilities like health-care services, schooling, and so on. While Gulati and Ray (2016) model this interaction on a monopolist service provider in a neighbourhood structured as a linear city where rich and poor consumers live side by side, in this chapter we extend the analysis to a competitive framework with free entry and exit where the natural neighbourhood structure is a circular city. We find inverted-U shape relationships between income inequality and market access and welfare of the poor: if we compare a cross-section of societies, the poor community as a whole is initially better off living in relatively richer societies, but, beyond a point, the aggregate market access and consumer surplus of the poor starts declining as society becomes richer. We identify the possibility of complete exclusion of the poor from the market: a scenario where the service providers cater only to the rich and the poor have absolutely no market access, and find that it is the higher income gap between rich and poor that exposes the poor to this unfortunate outcome.</p
SHARECROPPING, LAND EXPLOITATION AND LAND-IMPROVING INVESTMENTS
No full textThis paper analyses the tenancy problem in a dynamic setup and addresses two long-standing issues: inefficiency and lack of investment. It considers the problems that the tenant, with a shorter-term interest in the farm than the landlord, might overexploit the land to maximize immediate returns even at the cost of future damages, and under-supply long-run productivity improving investments in land. I show that the efficient (first-best) levels of input use and investment can be achieved (both in the steady state and in transition) by a suitable share contract which, by dampening incentives to maximize current returns, addresses the land exploitation problem, and by an appropriate cost allocation rule which can address the investment problem
A Procurement Auction Model Under Supplier Uncertainty
No full textAs business-to-business commerce shifts to the Internet, newer suppliers with cheaper but unreliable technologies enter the market place to win orders from firms by beating the price of their perfectly reliable (but expensive) competitors. The dilemma facing purchasing firms is the allocation of the tender across suppliers of varying supply reliability. We model the procurement problem as a sealed-bid auction where the buyer has to allocate purchases between an expensive but reliable supplier and a cheaper but unreliable supplier, and the suppliers specify prices for different proportions of the tender awarded to them. A unique feature of our model is that it allows the purchasing firm to reserve the right to change the size of the total tender awarded depending on the nature of the bids received from the suppliers. We prove that the set of Nash equilibrium outcomes coincides with the set of efficient outcomes, and for strictly convex cost functions, the outcome is unique. Further, we show that the possibility of implicit supplier collusion is strengthened in that the suppliers may structure their bids forcing the buyer to allocate the tender resulting
in the worst-case (highest price) scenario for him. We also show that the Anton-Yao (A-Y, 1989) model can be interpreted as a limiting case of our model and that the
efficient outcome derived in this paper is the only robust outcome in the A-Y model
Inequality, Industrialization and Financial Structure
No full textWe introduce monitored bank loans and non-monitored tradeable securities as sources of external finance for firms in a dynamic general equilibrium model. Due to frictions arising from moral hazard, access to credit and each type of financial instrument are determined by the wealth distribution. We study the depth of credit markets (financial development) and conditions under which the financial system relies more on either type of external finance (financial structure). Initial inequality is shown to determine financial development, with high inequality preventing developed systems from emerging. A more equitable income distribution as well as larger capital requirements of industry tend to promote a bank-based system. Investment risk promotes a greater reliance on non- monitored sources, while institutional parameters affect the financial structure in intuitively plausible ways. The model's predictions are consistent with historical and recent development experience
The Development and Structure of Financial Systems
No full text44 p.We introduce monitored bank loans and non-monitored tradeable securities as sources of external finance for firms in a dynamic general equilibrium model. Due to frictions arising from moral hazard, access to credit and each type of financial instrument are determined by the wealth distribution. We study the depth of credit markets (financial development) and conditions under which the financial system relies more on either type of external finance (financial structure). We identify initial inequality, investment size and institutional factors as key determinants of financial development, while an economy’s financial structure is shaped by its investment technology and legal and financial institutions. The model’s predictions are consistent with historical and recent development experience
The Development and Structure of Financial Systems
No full textWe introduce monitored bank loans and non-monitored tradeable securities as sources of external finance for firms in a dynamic general equilibrium model. Due to frictions arising from moral hazard, access to credit and each type of financial instrument are determined by the wealth distribution. We study the depth of credit markets (financial development) and conditions under which the financial system relies more on either type of external finance (financial structure). Initial inequality is shown to determine financial development, with high inequality preventing developed systems from emerging. A more equitable income distribution as well as larger capital requirements of industry tend to promote a bank-based system. Investment risk promotes a greater reliance on non-monitored sources, while institutional parameters affect the financial structure in intuitively plausible ways. The model's predictions are consistent with historical and recent development experience
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