has india s economic growth become more pro poor in the wake of economic reforms the extent to which india s poor have benefited from the country s economic growth has long been debated a new series of consumption based poverty measures spanning 50 years including a 15 year period after economic reforms began in earnest in the early 1990s is used to examine that issue growth has tended to reduce poverty including in the post reform period there is no robust evidence of more or less poverty responsiveness to growth since the reforms began although there are signs of rising inequality the impact of growth is higher when using poverty measures that reflects distribution below the poverty line and when using growth rates calculated from household surveys rather than national accounts the urban rural pattern of growth matters for the pace of poverty reduction however in marked contrast to the period before the reforms urban economic growth in the period after the reforms has brought significant gains to the rural poor as well as the urban poor

the value of trade agreements in the presence of political pressures an argument often heard in favor of trade agreements is that by committing to free trade a government can credibly distance itself from domestic lobbies but several existing models of endogenous protection suggest that governments have no interest in foreclosing interest group pressures since governments derive rents from the political process we develop a small country model in which factors are sector specific in the short run but mobile in the long run we show that in this setting a government may be worse off in the political equilibrium than under commitment to free trade and hence it may value a trade agreement

the economist s approach to the problem of corruption summary this paper will first distinguish between the non economist s approach to corruption largely on the basis of public morals and norms and the economist s approach in terms of incentives and organization i then discuss why otherwise similar countries may end up with different equilibrium levels of corruption why such equilibria tend to persist and why corruption in some countries seems to be more damaging to the economy than in others i then try to derive some policy lessons 2005 elsevier ltd all rights reserved

favoring domestic firms in procurement contracts abstract this paper studies the rationale for giving preference to domestic firms in the award of government contracts when the regulator is interested in maximizing domestic welfare it is seen that in the absence of comparative advantages the regulator should discriminate in favor of the domestic firms because foreign firms profits do not enter in domestic welfare furthermore i show that the form of the discrimination function depends on the mechanism being used in order to simplify the implementation of an optimal policy the regulator should choose mechanisms based on second price auctions

the comparative politics of corruption accounting for the east asian paradox in empirical studies of corruption growth and investment abstract numerous empirical studies demonstrate that corruption reduces investment and or slows growth but how robust are these relationships this question is answered by conducting a series of crosscountry regression tests using four different corruption datasets we find that corruption slows growth and or reduces investment in most developing countries particularly small developing countries but increases growth in the large east asian newly industrializing economies the latter finding provides solid empirical support to a country case literature that explains the east asian paradox the combination of high corruption and high growth in terms of stable and mutually beneficial exchanges of government promotional privileges for bribes and kickbacks

centralized vs decentralized procurement does dispersed information call for decentralized decision making abstract should the government procure equipment for its agencies or let them run their own procurement auctions suppose the agency has private information about product quality but is inclined to favour local suppliers decentralization saves bureaucracy and agency costs costs tied to truthful revelation of quality information but leads to biased decisions a discriminatory auction i show that the costs associated with discrimination may increase when the quality differences or the probability that the agency knows the quality increase moreover this effect may be dominant implying that increased importance of local information may be an argument for centralization

the economic lives of the poor in what turned out to be a rhetorical master move the 1990 world development report from the world bank defined the extremely poor people of the world as those who are currently living on no more than 1 per day per person measured at the 1985 purchasing power parity ppp exchange rate in 1993 the poverty line was updated to 1 08 per person per day at the 1993 ppp exchange rate which is the line we use in this paper poverty lines have always existed indeed 1 per day was chosen in part because of its proximity to the poverty lines used by many poor countries 1 however the 1 a day poverty line has come to dominate the conversations about poverty to a remarkable extent

top indian incomes 1922 2000 this article presents data on the evolution of top incomes and wages for 1922 2000 in india using individual tax return data the data show that the shares of the top 0 01 percent 0 1 percent and 1 percent in total income shrank substantially from the 1950s to the early to mid 1980s but then rose again so that today these shares are only slightly below what they were in the 1920s and 1930s this u shaped pattern is broadly consistent with the evolution of economic policy in india from the 1950s to the early to mid 1980s was a period of socialist policies in india whereas the subsequent period starting with the rise of rajiv gandhi saw a gradual shift toward more pro business policies although the initial share of the top income group was small the fact that the rich were getting richer had a nontrivial impact on the overall income distribution although the impact is not large enough to fully explain the gap observed during the 1990s between average consumption growths shown in national sample survey based data and the national accounts based data it is sufficiently large to explain a non negligible part of it

obtaining a driver s license in india an experimental approach to studying corruption we conduct two experiments to understand the process of obtaining a driver s license in india in the first experiment we randomly assign license candidates to one of three groups bonus offered a financial reward if they could obtain their license fast lesson offered free driving lessons upfront and control the control group alone illustrates bureaucratic failures 71 of the license getters in that group avoided the mandated driving test and 62 failed a surprise driving test the system responds to private needs there are more license getters in the bonus group but at a social cost there are more license getters who cannot drive in the bonus group the system however also appears to respond to social considerations as there are more license getters in the lesson group large extra legal payments are made by license getters those in the control group pay 2 5 times the official fee more of these extra legal payments take place in the bonus group surprisingly these extra legal payments are not direct bribes to bureaucrats but instead payments to agents in the second experiment we perform an audit study to better understand the role of agents the audit shows that agents can provide licenses to individuals even if they cannot drive but the audit also shows that agents cannot as easily circumvent all other rules we argue that our findings are most consistent with agents being the channel for corruption in this system we also report some suggestive evidence that bureaucrats create red tape possibly to induce more license candidates to use agents

economic integration and corruption abstract we study the link between corruption and economic integration integration is modeled by a common regulation for public procurement we show that integration resolves a term of trade driven prisoner s dilemma and will always take place in the absence of corruption corruption may destroy the incentives for integration if the propensities to corruption are too different the more honest country which benefits less from integration will not be willing to join the union this difference in corruption propensities can be offset by a difference in efficiency we also show that integration has the positive effect of reducing corruption

government procurement and international trade abstract we model the bidding for a government contract in which there is imperfect competition each bidder is better informed about his own costs than either his rival bidders or the government and the distribution of the domestic firms costs differs from the distribution of foreign firms costs because of comparative advantage effects we find that the government minimizes its expected procurement cost by operating a price preference policy not necessarily purchasing from the lowest bidder

aspects of moral change in india 1990 2006 evidence from public attitudes toward tax evasion and bribery summary observers have asserted that india s economic rise coincides with moral change this study assesses some notable aspects of this claim by using public attitudes toward tax evasion and bribery as indicators of moral values using repeated cross sectional data from the world values surveys i find that tolerance for tax evasion and bribery grew relatively slightly from 1991 to 1996 and then increased rapidly from 2001 to 2006 double interaction regression models show tolerance converging by gender and religion and tolerance diverging between the poor and non poor however the regional patterns are complex finally university educational attainment is associated with decreasing tolerance

economic liberalization and indian economic growth what s the evidence india s growth and poverty performance over the last three decades has been a subject of great curiosity unlike the east asian countries india s growth spurt is not associated with exceptionally high domestic savings or foreign capital inflows or manufacturing exports so what triggered the change in the growth trajectory did the market liberalization policies of the 1990s help how have the initial conditions shaped the process and how has the indian model impinged on india s central problem of mass poverty this paper surveys the literature and offers its own assessment of the drivers of change jel i32 o13 o14 o15 o21 o47

corruption and the composition of government expenditure abstract this paper asks whether predatory behavior by corrupt politicians distorts the composition of government expenditure corruption is found to reduce government spending on education in a cross section of countries

rural industrialization in china and india role of policies and institutions summary the dynamic rural nonfarm sector in china has been a major contributor to the country s remarkable growth while in india the growth in output and employment in this sector has been rather stagnant this paper argues that the observed patterns in the rural nonfarm development are the results of institutional differences between the two countries especially in their political systems ownership structure and credit institutions a review of the strengths and weaknesses of the rural nonfarm economy in china and india highlights the potentials and challenges of growth in the sector

promoting fair competition in public procurement abstract if a government cares for local firms profit but not for foreign firms foreign firms will be discriminated against when competing for government procurement contracts foreign firms will be chosen less often and when chosen earn less profit than local firms we analyze a more central authority s policies against such discrimination given a situation in which a government has private information on product quality and the competing firms have private information on own costs necessary and sufficient conditions for free revelation of quality information are derived finally optimal policy when these conditions are not satisfied is characterized and discussed

a combined approach for segment specific market basket analysis abstract market baskets arise from consumers shopping trips and include items from multiple categories that are frequently chosen interdependently from each other explanatory models of multicategory choice behavior explicitly allow for such category purchase dependencies they typically estimate own and across category effects of marketing mix variables on purchase incidences for a predefined set of product categories because of analytical restrictions however multicategory choice models can only handle a small number of categories hence for large retail assortments the issue emerges of how to determine the composition of shopping baskets with a meaningful selection of categories traditionally this is resolved by managerial intuition in this article we combine multicategory choice models with a data driven approach for basket selection the proposed procedure also accounts for customer heterogeneity and thus can serve as a viable tool for designing target marketing programs a data compression step first derives a set of basket prototypes which are representative for classes of market baskets with internally more distinctive complementary cross category interdependencies and are responsible for the segmentation of households in a second step segment specific cross category effects are estimated for suitably selected categories using a multivariate logistic modeling framework in an empirical illustration significant differences in cross effects and price elasticities can be shown both across segments and compared to the aggregate model

politics of economic liberalization in india abstract attempts at liberalizing india s import substitution model of development have had a mixed record some success in changing the policy regime highlights the role of a new technocratic leadership that has received support from both indian business groups and from external aid agencies conversely popular sectors within india including the rank and file of the ruling party the organized workers in the public sector and the numerically significant middle and lower peasantry have registered their opposition while the government remains committed to liberalizing the economy the momentum has slowed down and given the pressures of electoral politics a populist economic program has been simultaneously readopted it appears that the marriage of political and economic liberalism may not be an easy one in countries like india

auction design and favoritism abstract the theory of auctions has ignored the fact that often auction designers not the principal design auctions in a multi attribute auction the auction designer may bias his subjective evaluation of quality or distort the relative weights of the various attributes to favor a specific bidder an ancient concern in the procurement of weapons in the auctioning of government contracts and in the purchase of electricity by regulated power companies the paper analyzes the steps to be taken to reduce the possibility of favoritism it is first shown that in the absence of favoritism quality differentials among firms are more likely to be ignored if the auction designer has imperfect information about the firm s costs second if the auction designer may collude with only one bidder the other bidders should be chosen if they are at least as efficient as the former bidder and no hard information about quality differentials is released by the auction designer that would justify fair discrimination in favor of the former bidder last if the auction designer can collude with any bidder the optimal auction tends to a symmetric auction in which quality differentials are ignored the possibility of favoritism reduces the auction designer s discretion and makes the selection process focus on non manipulable monetary dimensions of bids

deals and delays firm level evidence on corruption and policy implementation times whether demands for bribes for particular government services are associated with expedited or delayed policy implementation underlies debates around the role of corruption in private sector development the grease the wheels hypothesis which contends that bribes act as speed money implies three testable predictions first on average bribe requests should be negatively correlated with wait times second this relationship should vary across firms with those with the highest opportunity cost of waiting being more likely to pay and facing shorter delays third the role of grease should vary across countries with benefits larger where regulatory burdens are greatest the data are inconsistent with all three predictions according to the preferred specifications ceteris paribus firms confronted with demands for bribes take approximately 1 5 times longer to get a construction permit operating license or electrical connection than firms that did not have to pay bribes and respectively 1 2 and 1 4

curbing agency problems in the procurement process by protest oversight we study a model in which a potential bidder in a government procurement may challenge its exclusion from the procurement before a quasi judicial board in the case of a sole source procurement the excluded vendor does not know whether the decision was justified in terms of expected surplus or alternatively was due to an agency problem we explain the occurrence of i equilibrium protests ii deterrence of inefficient sole sourcing iii overdeterrence the choice of a competitive procurement when sole source would be appropriate iv buyoff settlements which preserve inappropriate sole source procurement and v fedmail settlements which accompany appropriate sole source procurements our normative analysis addresses recent legislative initiatives to reform the protest process

nobel lecture the economic way of looking at behavior an important step in extending the traditional theory of individual rational choice to analyze social issues beyond those usually considered by economists is to incorporate into the theory a much richer class of attitudes preferences and calculations while this approach to behavior builds on an expanded theory of individual choice it is not mainly concerned with individuals it uses theory at the micro level as a powerful tool to derive implications at the group or macro level the lecture describes the approach and illustrates it with examples drawn from my past and current work