Incomplete Contracts, Incentives and Economic Power

This paper formalizes ideas from classical and radical political economy on task allocation and technology adoption under capitalism. A few previous studies have attempted this, but the framework and results in this paper are different. I model labor contracts that are incomplete owing to unforeseen/indescribable contingencies, leading to Pareto-improving renegotiation and a hold-up problem. Given path dependence, the allocation is sub-optimal, with the extent of inefficiency depending upon the degree of incompleteness. This model captures insights from the above literature on the microeconomic roots of inefficiency and power. It also provides a concrete setting where indescribable contingencies do (or dont) matter - a much-debated issue.Incomplete Contracts, Unforeseen/Indescribeable Contingencies, Hold-Up, Classical and Radical Political Economy

Social Capital and Basic Goods: The Cautionary Tale of Drinking Water in India

India; water

Polarization, inequality and growth: The Indian experience

We analyze polarization in India roughly in the past two and half decades using consumption expenditure data. We show that both bipolarization and multidimensional polarization (on several dimensions: caste, rural-urban, state, region) have increased since the 1990s. In the case of bipolarization, this is a reversal from the earlier trend (in the 1980s). Overall, our results suggest that the high growth that India has been witnessing since the 1990s has been associated with widening disparities. Comparing polarization and inequality, we find similarities, but also some differences. Our results therefore underscore the importance of studying polarization as distinct from traditional inequality.Polarization; Inequality; Growth in India.

Integrated Optimization of Procurement, Processing and Trade of Commodities in a Network Environment

We consider the integrated optimization problem of procurement, processing and trade of commodities over a network in a multiperiod setting. Motivated by the operations of a prominent commodity processing firm, we model a firm that operates a star network with multiple locations at which it can procure an input commodity and has processing capacity at a central location to convert the input into a processed commodity. The processed commodity is sold using forward contracts, while the input itself can be traded at the end of the horizon. We show that the single-node version of this problem can be solved optimally when the procurement cost for the input is piecewise linear and convex, and derive closed form expressions for the marginal value of input and output inventory. However, these marginal values are hard to compute because of high dimensionality of the state space and we develop an efficient heuristic to compute approximate marginal values. We also show that the star network problem can be approximated as an equivalent single node problem and propose heuristics for solving the network problem. We conduct numerical studies to evaluate the performance of both the single node and network heuristics. We find that the single node heuristics are near-optimal, capturing close to 90% of the value of an upper bound on the optimal expected profits. Approximating the star network by a single node is effective, with the gap between the heuristic and upper bound ranging from 7% to 14% for longer planning horizonshttp://deepblue.lib.umich.edu/bitstream/2027.42/55417/1/1095-Anupindi.pdfhttp://deepblue.lib.umich.edu/bitstream/2027.42/55417/4/1095-Anupindi_2010.pd

Intra-City Inequalities, Neighborhoods and Economic Development

How do neighborhood characteristics influence economic development? How do social cleavages operate within cities in developing countries? This study is among the first of its kind to be conducted in the developing world, and focuses on India to provide answers. Given the limitations of publicly available sources of secondary data, we rely on a spatially representative household survey that we designed and conducted in the cities of Hyderabad and Mumbai. We conduct an inequality decomposition exercise to show that a substantial portion of intra-city income inequality is explained by social cleavages such as classes and social groups (caste and religion). While urban inequalities are stark, we show that spatial co-existence of classes and social groups (a phenomenon that we term as “Grayness”) is pronounced. At the neighborhood level, Grayness has a strong and positive impact on development outcomes. We establish this result by using an instrument that captures intra-city variations in the history of industrialization in these two cities. We discuss the policy implications of our findings