Consumption efficiency hypothesis and the optimality of free trade policy in a small open economy

The paper is designed to examine the optimality of the free trade policy in a small poor economy incorporating the consumption efficiency hypothesis in the simple two-by-two Heckscher-Ohlin-Samuelson (HOS) framework. It finds that the protectionist policy in the form of a tariff on the capital-intensive import-competing sector may improve social welfare and unambiguously raise the economy-wide effective employment.Consumption efficiency hypothesis; Optimality of free trade; Protectionist policy; Heckscher-Ohlin-Samuelson model; Effective employment

Foreign Capital, National Welfare and Unemployment in a Fair Wage Model

The paper develops a three-sector general equilibrium model that can explain simultaneous existence of unemployment of both skilled and unskilled labour. The unemployment of unskilled labour is explicated in terms of rural-urban migration mechanism while that of skilled labour is shown using the ‘fair wage hypothesis’. The paper finds that foreign direct investment (FDI) in the primary export sector improve both national welfare and urban unemployment problem of unskilled labour while the consequences of foreign capital flows into the import-competing sector and high-skill export sector are ambiguous. The paper justifies the desirability of FDI flow in the primary export sector from the perspective of both unemployment and social welfare.Fair wage hypothesis; skilled labour; unskilled labour; national welfare; unemployment.

Consumption efficiency hypothesis and the HOS model: Some counterintuitive results

We show how accommodation of the consumption efficiency hypothesis can explain the existence of involuntary unemployment in the two-by-two Heckscher-Ohlin-Samuelson (HOS) model. Although the workers consume both the commodities their nutritional efficiency depends on the consumption of one commodity only. An increase in the relative price of the capital-intensive (labour-intensive) good raises (lowers) the effective employment in the economy. The effects of commodity price changes on the output levels of the two sectors might be perverse. These results are different from the standard HOS results.Consumption efficiency hypothesis; General equilibrium; Heckscher-Ohlin-Samuelson model; Effective employment; Output composition

FDI in Agricultural Land, Welfare and Unemployment in a Developing Economy

The paper purports to examine the consequences of foreign direct investment (FDI) in agricultural land in a developing economy using a three-sector general equilibrium model with simultaneous existence off unemployment of both skilled and unskilled labour. The analysis finds that FDI in agriculture does not only improve national welfare unequivocally but also mitigates unemployment problem of both types of labour. The paper theoretically justifies the desirability of flow of FDI in agriculture in the developing economies.FDI in agricultural land; national welfare; unemployment; fair wage hypothesis; skilled labour; unskilled labour; general equilibrium

Foreign Capital Inflow, Skilled-Unskilled Wage Inequality and Unemployment of Unskilled Labour in a Fair Wage Model

This paper has developed a three-sector general equilibrium framework that explains unemployment of both skilled and unskilled labour. Unemployment of unskilled labour is of the Harris-Todaro (1970) type while unemployment of skilled labour is caused due to the validity of the FWH in the high-skill sector. There are two types of capital one of which is specific to the primary export sector while the other moves freely among the different sectors. Inflows of foreign capital of either type unambiguously improve the economic conditions of the unskilled working class. However, the effects on the skilled-unskilled wage inequality and the extent of unemployment of both types of labour crucially hinge on the properties implied by the efficiency function of the skilled workers.Fair wage hypothesis; skilled labour; unskilled labour; wage inequality; foreign capital; unemployment

Economic Liberalization and Informal Wage in a Small Open Economy: Does Capital Mobility count?

Empirical evidence suggests that the size of the informal sector in the developing countries has increased considerably during the liberalized economic regime. The present paper purports to analyze the consequences of economic reforms on the wellbeing of the informal sector workforce using a three-sector general equilibrium model with two informal sectors. The theoretical analysis finds that different liberalized policies produce diverse effects on the informal wage and that these results are independent of the nature of capital mobility between the informal and the formal sectors. It also shows that labour market reforms, contrary to the common wisdom, are likely to produce favourable effects on the informal wage.Informal sector; formal sector; informal wage; economic reforms; capital mobility; general equilibrium model

CREDIT-PRODUCT INTERLINKAGE, CAPTIVE MARKETS AND TRADE LIBERALIZATION IN AGRICULTURE: A THEORETICAL ANALYSIS IN AGRICULTURE: A THEORETICAL ANALYSIS

This paper builds a model of fragmented duopsony in backward agriculture following Basu and Bell (1991) in which the purchasers (traders) have captive markets each but compete in a contested market. We focus on the formation of captive markets through trader-farmer interlinkage in the form of interlinked credit-product contracts (ICPCs). ICPC (or the formation of captive markets) is not an entry-preventive strategy in the model. Its motive is to push the farmers to their reservation income level. However, the captive and the contested markets are linked by the requirement that the reservation income of a captive farmer has to equal the income of a farmer in the contested market. In general, in our model strategic considerations determine the extent of use of ICPCs rather than explaining their existence. In this set-up we examine the effects of trade liberalization in agriculture on the village economy. We show that a reduction in the credit subsidy will raise the size of the captive market, leads to deterioration in the welfare of the farmers and may lower the agricultural productivity of the economy. On the contrary, an increase in the international price of the crop unambiguously improves the welfare of the farmers but the effect on the agricultural productivity is ambiguous. The paper argues that unless the developed countries liberalize trade in their agricultural sector, it would be premature for the developing countries to go in for agricultural trade liberalization and remove all farm subsidies, as this policy may in fact be counterproductive.Trader, Farmer, Captive segment, Contested segment, Interlinkage, Nash equilibrium, Trade liberalization in agriculture

Proliferation of metallic domains caused by inhomogeneous heating near the electrically-driven transition in VO2_2 nanobeams

We discuss the mechanisms behind the electrically driven insulator-metal transition in single crystalline VO$_2$ nanobeams. Our DC and AC transport measurements and the versatile harmonic analysis method employed show that non-uniform Joule heating causes phase inhomogeneities to develop within the nanobeam and is responsible for driving the transition in VO$_{2}$. A Poole-Frenkel like purely electric field induced transition is found to be absent and the role of percolation near and away from the electrically driven transition in VO$_{2}$ is also identified. The results and the harmonic analysis can be generalized to many strongly correlated materials that exhibit electrically driven transitions

Economic Liberalization and Informal Wage in a Small Open Economy: Does Capital Mobility count?

Empirical evidence suggests that the size of the informal sector in the developing countries has increased considerably during the liberalized economic regime. The present paper purports to analyze the consequences of economic reforms on the wellbeing of the informal sector workforce using a three-sector general equilibrium model with two informal sectors. The theoretical analysis finds that different liberalized policies produce diverse effects on the informal wage and that these results are independent of the nature of capital mobility between the informal and the formal sectors. It also shows that labour market reforms, contrary to the common wisdom, are likely to produce favourable effects on the informal wage