Economics
Permanent URI for this communityhttp://hdl.handle.net/1903/2232
Browse
4 results
Search Results
Item The Elephant in the Road: An Economic Analysis of the Indian Car Market(2012) Chugh, Randy; Cropper, Maureen; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)Chapter 1 To investigate how fuel economy is valued in the Indian car market, I compute the cost to Indian consumers of purchasing a more fuel-efficient vehicle and compare it to the benefit of lower fuel costs over the life of the vehicle. I estimate hedonic price functions for four market segments (petrol hatchbacks, diesel hatchbacks, petrol sedans, and diesel sedans) to compute 95% confidence intervals for the marginal cost to the consumer for an increase in fuel economy. I find that the associated present value of fuel savings falls within the 95% confidence interval for most specifications in all market segments for the years 2002 through 2006. Thus, I fail to consistently reject the hypothesis that consumers appropriately value fuel economy. Also, I look at vehicle models available in both petrol and diesel form (i.e., twins). Diesel vehicles are generally more expensive than their petrol twins, but, due to higher fuel economy and lower fuel price, have sufficiently lower fuel costs to more than offset the difference. Net savings from purchasing a diesel twin are substantial. Diesel hatchback owners save the equivalent of 50% of the purchase price of their chosen vehicle; diesel sedan owners save 18% of the purchase price of theirs. In 2006, 74% of twin hatchback owners and 59% of twin sedan owners realized these savings by buying the diesel twin. Due to their lower monthly driving distance, forgone savings by owners of petrol twins are lower, but still substantial. Petrol hatchback owners could have saved 24% of the purchase price of their chosen vehicle and petrol sedan owners could have saved 10%. Owners of petrol twins are apparently willing to forgo these substantial savings in order to drive their preferred vehicle. Chapter 2 The Indian car market is the fastest growing in the world. With increased mobility, however, has come increased foreign oil dependence, fuel consumption, and associated externalities. In response to this, the Indian government is contemplating fuel economy standards, but at the same time continues to subsidize diesel fuel. The result of this policy has been a diesel discount of 30%, relative to petrol, and \emph{dieselization}, the increasing market share of diesel cars. This chapter uses a model of vehicle choice and vehicle use to compare the welfare impacts of two possible policy responses: diesel fuel taxation and diesel vehicle taxation. Using data comprised of household-level vehicle purchase and driving distance observations from the 2006, 2008, and 2010 JD Power APEAL survey, I estimate a theoretically consistent model of discrete-continuous choice which explicitly accounts for unobserved household and vehicle characteristics and correlation between vehicle choice and driving distance. I find the effect of a diesel fuel tax that eliminates the petrol/diesel price gap to be 4.6 percentage point reduction of the market share of diesel cars based on results from 2006, a 7.9 percentage point reduction based on results from 2008, and an 8.6 percentage point reduction based on results from 2010. On average, a diesel car tax of 21.9% would achieve the same result. The diesel car tax option, however, does relatively little to change intensive margin incentives. A smaller diesel fuel tax, sufficient to yield the same total fuel conservation as the diesel car tax, compares favorably to both policies on efficiency grounds. While the subsidy eliminating diesel fuel tax is more efficient than the diesel car tax in terms of deadweight loss per liter of fuel conserved, the smaller diesel fuel tax actually results in a net welfare gain. This result comes from the fact that the pre-existing tax on petrol fuel raises enough revenue from those would-be diesel car buyers who are compelled to buy a petrol instead to more than compensate them back to their pre-tax utility levels. Comparing compensating variation of the subsidy eliminating diesel fuel tax to the diesel car tax, neither policy imposes a consumer welfare cost of more than 2% of new car buyers' average annual income. However, the welfare burden as a share of household income is found to be greater for the poorest households.Item MANUFACTURING SECTOR PRODUCTIVITY IN INDIA: ALL INDIA TRENDS, REGIONAL PATTERNS, AND NETWORK EXTERNALITIES FROM INFRASTRUCTURE ON REGIONAL GROWTH(2010) Mohommad, Adil; Hulten, Charles R; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation I examine sources of growth in the formal manufacturing sector in India, from 1970 to 2003. I consider both all-India trends and state-level trends in the growth of resource efficiency, measured by TFP, and the relative contribution of TFP growth to output growth in manufacturing, as compared to capital accumulation. At the state level, I also examine the relationship between per-capita income and trends in output per worker and TFP in the manufacturing sector. Finally, in a spatial econometric framework, I test for the presence and magnitude of network spillovers from infrastructure, including national and state highways, and electricity generation capacity, on manufacturing TFP levels across states. My work contributes to an on-going debate on the response of manufacturing sector TFP to the implementation of economic reforms in India, in the 1980s and 1990s. At the regional level, this dissertation addresses not only the literature on the causes behind rising income inequality across states, but also on the role of infrastructure on regional growth, restricting attention to the manufacturing sector. The results of this dissertation show that at the all-India level and at the state level, manufacturing sector TFP growth accelerated in India during periods of economic reform. The contribution of TFP growth to output growth increased in the 1990s relative to earlier periods, and exceeded the contribution of capital accumulation. At the state level, I find evidence of convergence in growth rates of output per worker and TFP in manufacturing. I do not find evidence of a significant correlation between output per worker in manufacturing and state per-capita incomes. Given the relatively small share of the manufacturing sector in state GDP on average, these results imply that the source of rising income inequalities across states may not be manufacturing. Finally, I find some evidence to suggest that there exist positive network spillovers from physical infrastructure on manufacturing sector TFP. The results suggest that doubling the stock of national and state highways, and electricity generation capacity can lead to a nine percent increase in manufacturing sector output.Item Competing or Collaborating Siblings? An Investigation of the Relationship between Industrial and Trade Policies(2006-08-02) Sharma, Gunjan; Betancourt, Roger; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation investigates the relationship between industrial and trade policies and their impact on firm-level incentives to become more productive. In Chapter two we use a two-sector growth model and show that the impact of a rise in competition in the intermediate goods sector (that invests in quality-enhancing technology) is sensitive to market structure in the final goods sector. We find that more competition in the intermediate goods sector (due to industrial policy reform) can lead to rising investment in technology and hence rising productivity. Further we find that industries that face more competition domestically can perform better in the face of foreign competition. That is, there may be strategic complementarities between industrial deregulation and trade reform. We also find that a rise in competition in the final goods sector can affect investment incentives in the intermediate goods sector and hence affect productivity. This study highlights the importance of market structure assumptions in growth models. The third chapter tests predictions from chapter two using two unique data sets. We use the industrial licensing regime in India (operating from the 1950s onwards) and its gradual relaxation during the 1980s and 1990s to test whether industrial de-regulation that leads to more competition domestically, affects firm-level productivity. To our knowledge, ours is the only detailed data set on Indian industrial policy. Our firm-level data for the period 1980-94 is a census of firms in India and has been rarely used in literature. We also use the interesting chronology of reforms in India (industrial de-regulation in the 1980s and trade reforms in 1991) to test whether industries that faced more competition domestically tend to perform better when facing foreign competition. Our identification strategy uses an important institutional feature of Indian policy. Firms with assets below a certain defined rupee threshold were exempt from licensing requirements. This institutional feature provides us within-industry variation that allows us to identify the interaction between de-licensing and exemption status. We find that industrial de-regulation during the 1980s led to a significant rise in firm productivity. Further preliminary results suggest that there exists a strategic complementarity relationship between industrial and trade policies--industries and firms that were de-licensed tend to perform better vis productivity after trade liberalization. Our results are robust to the inclusion of a wide variety of firm and industry fixed effects and controls for policies other than de-licensing that may affect productivity. This chapter contributes to the literature by being the only detailed empirical analysis of the industrial licensing regime in India, especially the de-licensing that took place during the 1980s and by providing evidence of the crucial link between trade and industrial de-regulation.Item Changes in the Wage Gap of Gender and Caste Groups in India(2006-04-24) Jacob, Marilyn; Sanders, Seth; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)We explore the changes in the wage gap of caste and gender groups in India. Traditional Hindu society divided people into social classes based on the caste system. The lowest of the castes have traditionally been economically disadvantaged. Women in India have typically been restricted to the household and their participation in the formal labor market has begun expanding only recently. We explore the changes that these two groups have experienced over the years using a nationally representative dataset. In the second chapter we decompose the wage gaps of these groups into explained and unexplained components based on the Blinder-Oaxaca (1973) decomposition technique. Our contribution to the literature here is the extension of the analysis of discrimination to a society with a clearly established social hierarchy. We find that the gross wage gap has reduced over this period, and the extent of the gap attributable to discrimination has decreased over time. We further decompose the wage gap into components attributable to wage differences and occupational differences based on Brown et al. (1980). We find that the wage discrimination component has decreased over time and the job discrimination component is statistically insignificant. In the third chapter we investigate whether there have been beneficial wage gains for women and lower castes because of increased competition following liberalization of trade in India. Based on Becker's model of taste-based employer discrimination, it is expected that as an economy becomes more competitive, employer discrimination should decline. The trade liberalization reforms that began in 1991 in India increased competition by lowering protection in certain manufacturing industries. Firms who could indulge a taste for discrimination when trade protection allowed supernormal profits may not have been able to continue to do so as competition eliminated such profits. Using individual-level data and tariff data from pre- and post-reform periods, we find that wage differences reduced for female workers relative to male workers in the more open manufacturing sector industries. However, there is no significant effect on the wage differential between low and high caste workers.