Studies in Microeconomics

Out of the 104 islands of Indian Sundarbans, 54 are inhabited. These islands have mud embankments which protect them from intrusion of river and sea water and have made human settlement possible in these islands. Once the embankments were protected from tidal and storm surges by a layer of mangrove forests. But now the mangrove cover has vanished and consequently the embankments are frequently eroded or develop breaches being directly exposed to tidal and storm surges. One way to protect these mud embankments is to recreate mangrove plantations along the toe-line on the outer side of the embankments. This article uses a framed lab-in-field experiment to measure inclination towards community participation in regenerating common pool resources (CPRs), specifically regeneration of mangrove forest on the outer side of the embankments. The 320 subjects who participated in the experiment were villagers from different islands in the Indian Sundarbans. The experiment is a hybrid of the simple Public Goods Game with Voluntary Contributions Mechanism (VCM) and the Trust Game. The first is used to measure inclination towards contributing resources and effort for generation of CPRs and the second is to see if the participants trust others not to extract from the regenerated CPR and if such trust is reciprocated. The results show that voluntary contributions, contrary to theoretical prediction of free riding, are significantly high, though less than when there is no extraction. Trust levels are also quite high and a third of such trust is reciprocated.

JEL Codes: C92, H40, Q23

We show that allowing communication can increase optimal choices and efficiency in a multitask, incomplete contracting, principal–agent setting. We study two simple communication protocols, one allowing for one or more requests on non-contractible choices, and the other allowing for a request, promise and ex post payment. The protocol where principals are asked to communicate requests to the agent regarding non-contractible choices promotes better learning of optimal strategies on the part of the principals, but shows no tendency for coordination to superior outcomes. The benefits accrue mainly due to changes in the choices of principals, who issue communication, rather than those of agents. Coordination is promoted, and learning subdued, when the protocol permits promises and ex post payments, in addition to allowing a request. This protocol also increases efficiency, with the efficiency gains equal across the protocols.

JEL Codes: L14, C91

FDI contributed positively to sales, profit, employment and wages of firms in India from 2004 to 2018. Foreign capital is complementing domestic capital well embodying technology and innovations required for expansion of domestic firms in it. Foreign promoters have played quite significant economic roles among firms across production sectors in manufacturing industry in India. Besides sales, total expenses, managerial remunerations and corporation taxes, involvement of foreign promoters are statistically significant determinants of profits, employment and wages among firms across all seven sectors of the manufacturing industry is clear from analysis of the Prowess database for years 2004, 2008, 2012 and 2014. These effects were even stronger in each of Modi–I years between 2015-2019 that followed the Make in India initiative in 2014. Reforms including the outright 100 per cent ownership provision in the automatic route in most industrial sectors have produced good outcomes that have not only raised the volume of FDI per capita from around 16 dollars in 2000 to 285 dollars in 2018 but also raised the global ranking of India to 63 out of 190 economies in 2019 on the ease of doing business, putting India 79 places above now than in 2014. Based on theoretical and empirical analysis it can be concluded that good sentiments of FDI in India in Modi–II years started in 2019 will prevent diminishing returns on capital and contribute towards sustainable growth in coming years.

JEL Codes: F21, F23, F14, J31, O53

This study analyses the impact of industrial agglomeration on the total factor productivity (TFP) of Indian manufacturing. We employ plant-level data from the Annual Survey of Industries (ASI) to measure TFP and industrial agglomeration. Our econometric analysis discerns a positive impact of industrial agglomeration on plant productivity. In addition, we find that the larger plants are the beneficiaries of productivity gains associated with agglomeration. Further, our findings are robust to alternate measures of TFP.

Based on Ratha and Shaw’s (2007) model for estimating bilateral remittances, this study attempts to develop a new method for computing bilateral and aggregate remittances for the top five remittances-receiving countries for the period 2010-16. Considering tempered altruism as a motive for sending remittances, we develop an analytical framework based on the lifecycle hypothesis of saving to compute bilateral and aggregate remittances. We compare our bilateral and aggregate remittance values with the World Bank's values based on Ratha and Shaw’s (2007) model. Our analytical framework seems to be an improvement over the Ratha and Shaw model in several ways. First, our model considers several theoretical aspects of motivations to remit like saving, investment and wealth accumulation. Second, it addresses the issues of underestimation and overestimation, i.e. inaccuracy, of bilateral and aggregate remittances in various ways (for instance, by considering GDP per capita instead of GNI per capita we control for overestimation of remittances whereas by considering every kind of migrants from all destination countries we control for underestimation) and mitigates the probability of both these issues through the proposed model. Third, it compares regional bilateral remittances between the new model and the Ratha and Shaw model, delving on the reasons behind underestimation and overestimation, i.e. inaccuracy. We conclude that our analytical model has the potential to provide a general framework for computing bilateral and aggregate remittances which can be used for most of the remittance-receiving countries.

This study has examined the effects of climatic factors on mean yields and yield variability of four primary crops (rice, cotton, jowar and groundnut) in Telangana state by applying the Just and Pope production function over a period of 1956–2015. Using the three-stage feasible generalised least squares estimation procedure, we have estimated the production function of four crops. The empirical results have revealed that the effects of changes in climatic factors vary among crops under study. Maximum temperature has a significant adverse effect on rice, cotton and groundnut yields. Minimum temperature has a substantial positive effect on rice, cotton and groundnut. Further, rainfall is adversely related to cotton and groundnut yields. Maximum temperature has appeared as a risk-reducing factor for all study crops while minimum temperature as a risk-enhancing factor for rice, cotton and jowar. Lastly, rainfall has been found as a risk-enhancing factor for rice and groundnut whereas it is a risk-reducing factor for jowar and cotton. Results from the study have important implications on how Telangana’s farming sector will adapt to climate variability and change for sustainable agricultural development.

JEL Codes: C23, Q18, Q51, Q54