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Daily Archives: June 9, 2017

Shadow prices for a small open economy under uncertainty: Which expected values are valid

Clive Bell

UNU/WIDER Working Paper 112/2017

This paper re-examines the validity of using expected values to evaluate the social profitability of public investments under uncertainty. Departing from the usual assumption of an aggregate good, the setting is a small open economy that faces stochastic world prices for tradable goods and productivity levels in domestic production. It is shown that the so-called ‘border price rule’—the vector of the shadow prices of traded goods is a scalar multiple of their world price vector—is, in general, invalid when the vector of mean world prices is used.

The rule in that form is valid when the coefficient of risk aversion is 1. The error involved is small, however, even for values of that coefficient far from 1, including risk neutrality, when public expenditures are financed by lump-sum taxes. It is also small when preferences over goods are Cobb-Douglas and revenues are raised by taxing commodities. In contrast, using expected values to derive the shadow wage rate results in quite substantial errors when risk aversion is strong.



Growth, Employment, and Poverty in Latin America

Guillermo Cruces, Gary S. Fields, David Jaume, Mariana Viollaz

Growth, Employment, and Poverty in Latin America

This is an open access title available under the terms of a CC BY-NC-SA 3.0 IGO licence. It is free to read at Oxford Scholarship Online and offered as a free PDF download from OUP and selected open access locations.

This book examines the links between economic growth, changing employment conditions, and the reduction of poverty in Latin America in the 2000s. Our analysis answers the following broad questions: Has economic growth resulted in gains in standards of living and reductions in poverty via improved labour market conditions in Latin America in the 2000s, and have these improvements halted or been reversed since the international crisis of 2008? How do the rate and character of economic growth, changes in the various employment and earnings indicators, and changes in poverty and inequality indicators relate to each other?

Our contribution is an in-depth study of the multi-pronged growth-employment-poverty nexus based on a large number of labour market indicators (twelve employment and earnings indicators and four poverty and inequality indicators) for a large number of Latin American countries (sixteen of them).

The book presents a positive and hopeful set of findings for the period 2000 to 2012/13. Economic growth took place and brought about improvements in almost all labour market indicators and consequent reductions in poverty rates. But not all improvements were equal in size or caused by the same things. Some macroeconomic factors were associated with changes in labour market conditions, some of them always in the welfare-improving direction and some others always in the welfare-reducing direction. Most countries in the region suffered a deterioration in at least some labour market indicators as a consequence of the international crisis of 2008, but the negative effects were reversed very quickly in most countries.


courtesy:UNU-WIDER & OUP


Agrarian Question and Democratic Decentralization in Kerala

K. N. Harilal, K. K. Eswaran
Agrarian South: Journal of Political Economy 5(2&3) 1–33

This article is dedicated to Professor Sam Moyo, whose work on radical land reform in Zimbabwe within a neoliberal environment has engaged our attention and illuminated the subject of our own research, the agrarian question in post-land reform Kerala.

In Kerala, the experiment of democratic decentralization is now nearly two decades old. The present article focuses on one of its weakest links, the failure to generate sustainable livelihood opportunities, in either industry or agriculture. The crisis in agriculture is best seen as part of a larger process of structural transformation of the Kerala economy which has blocked agrarian transition and requires thorough overhauling of the social organization of production for overcoming the present impasse. Even though local governments have a major role in resolving the agrarian question, it presupposes greater involvement of higher tiers of government and deeper cooperation among different tiers.

url – http://journals.sagepub.com/doi/10.1177/2277976017702713
courtesy – SAGE


Virginia Morrow and  Renu Singh

Innocenti Working Papers, IWP, 2016, 19

This paper explores children’s accounts of violence in Andhra Pradesh, India, and the ways in which factors at the individual, family, community, institutional and society levels affect children’s experiences of violence. The paper analyses cross-sectional survey data and case studies from longitudinal qualitative data gathered over a seven-year period, from Young Lives. The paper is divided into four sections – a brief background section, study design and methods, findings from the survey, and findings from case studies. Large proportions of children experience violence (mostly physical punishment and emotional abuse) within their families, at school and, to some extent, within their communities. The findings demonstrate how children’s experiences of violence change with age and that gender differences within this dynamic process are very distinct. The paper reveals that a child’s disapproval of violence does not necessarily influence behaviour in later life, confirming the need for interventions to prevent and tackle violence as children grow up.

URL: https://www.unicef-irc.org/publications/866/

Courtesy: UNICEF

Food inflation and food price volatility in India: Trends and determinants


The study analyzes food inflation trends in India over the last decade. Annual trends show that different commodities have contributed to food inflation in different years and that no single commodity shows uniformly high inflation. A decomposition exercise shows that eggs, meat, fish, milk, cereals, and vegetables were generally the main contributors to recent food inflation. The contribution of pulses, except pigeon peas (arhar), and of edible oils remained low. Fruits and vegetables displayed a much higher degree of intrayear volatility, and high-weight commodities in the national consumption basket also showed very high inflation rates, which is a cause for concern. Results of the econometric analysis show that both supply and demand factors are important. Cereal and edible oil prices appear to be mainly driven by supply-side factors such as production, wage rates, and minimum support prices. For pulses, the effects of supply- and demand-side factors appear almost equal. The prices of eggs, meat, fish, milk, and fruits and vegetables appear to be driven mainly by demand-side factors.

URL: http://www.ifpri.org/publication/food-inflation-and-food-price-volatility-india-trends-and-determinants

Courtesy: IFPRI