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on Central and Western Asia |
| By: | Hélène Poirson |
| Abstract: | This paper assesses the effects of India's tax system on growth, through the level and productivity of private investment. Comparison of India's indicators of effective tax rates and tax revenue productivity with other countries shows that the Indian tax system is characterized by: (1) a high dependence on indirect taxes, (2) low average effective tax rates and tax productivity, and (3) high marginal effective tax rates and large tax-induced distortions on investment and financing decisions. The paper finds that the most recently proposed package of reforms would improve tax productivity and lower the marginal tax burden and tax-induced distortions. But firms that rely on internal sources of funds or face problems borrowing would continue to face high marginal tax rates. |
| Keywords: | Economic growth , India , Tax policy , Tax reforms , Indirect taxation , Tax rates , |
| Date: | 2006–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/93&r=cwa |
| By: | Catriona Purfield |
| Abstract: | This paper examines how growth has varied across India's states. It finds that (i) the income gap between rich and poor states has widened; (ii) rich and faster-growing states have been more effective in reducing poverty; (iii) poor and slower-growing states have had little success in generating private sector jobs; (iv) labor and capital flows do little to close income gaps; and (v) the volatility in economic growth is greatest in poor states. Differences in states' policies affect the cross-state pattern of growth. Greater private sector investment, smaller governments, and better institutions are found to have a positive impact on growth. |
| Keywords: | Economic growth , India , Economic reforms , Income distribution , |
| Date: | 2006–04–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/103&r=cwa |
| By: | Allen, Franklin; Chakrabarti, Rajesh; De, Sankar; Qian, Jun; Qian, Meijun |
| Abstract: | The authors examine the legal and business environments, financing channels, and governance mechanisms of various types of firms in India and compare them to those from other countries. Despite its English commonlaw origin, strong legal protection provided by the law, and a democratic government, corruption within India's legal system and government significantly weakens investor protection in practice. External financing of firms has been dominated by nonmarket sources of financing, while the characteristics of listed firms are similar to those from countries with weak investor protection. The evidence, including results based on a survey of small and medium-scale private firms, shows thatalternative financing channels provide the most important source of funds. The authors also find that informal governance mechanisms, such as those based on reputation, trust, and relationships are more important than formal mechanisms (such as courts) in resolving disputes, overcoming corruption, and supporting growth. |
| Keywords: | Banks&Banking Reform,Corporate Law,Financial Intermediation,Governance Indicators,Small Scale Enterprise |
| Date: | 2006–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3975&r=cwa |
| By: | Sachin Chaturvedi (Research and Information System for Developing Countries) |
| Abstract: | The study finds that in case of Article X, which basically deals with the publication and administration of trade regulations, India has already implemented most of the requirements. However comprehensive efforts are required to implement, the provision related to single inquiry point which may require software compatibility among various agencies involved apart from addressing the infrastructural constraints. In case of GATT Article VIII which deals with issues related to fees and charges and import and export formalities and documentation requirements most of the provisions are in place but efforts are required to improve the border agency coordination. In case of Articles X and VIII, the minimum cost is estimated at around Re. 2,016 million. This includes a major expenditure on equipments and infrastructure (82 per cent). The installation of electronic cargo clearance units is a major requirement at most of the leading ports in India. In Article V there is lot to be expected from India, the infrastructure requirements, especially for the physical infrastructure, deserve huge and urgent funding. This includes additional efforts required to support and strengthen the level of communication at the border points. Most of the Land Customs Stations (LCSs) require better infrastructure. There is need to attach greater priority to include various provisions of GATT Article V in the bilateral trade and transit treaties especially with land locked countries for greater facilitation of transit trade. |
| Keywords: | GATT, WTO, Trade Liberalization |
| JEL: | F1 |
| Date: | 2006–03 |
| URL: | http://d.repec.org/n?u=RePEc:esc:wpaper:406&r=cwa |
| By: | Fatih Savasan (Faculty of Economics and Administrative Sciences, Usak University, Usak, Turkey.); Friedrich G. Schneider (Department of Economics, Johannes Kepler University Linz, Austria) |
| Abstract: | Most studies about the shadow economy focus on the estimation of the aggregate size. However, this study aims to address the sectoral or micro aspects of this phenomenon using the data from the textile sector in Turkey. It uses discriminant analysis and ordered and logistic regression models to unveil the determinants of the informal hiring in Turkey. It concludes that high competition, the skill structure of the employees, perceived penalty scheme, and the size of the firms in the sector are important factors of the textile firms hiring informally. |
| Keywords: | informal hiring in Turkish textile sector; discriminant analysis; logistic regression model; ordered regression |
| JEL: | O17 O5 D78 H2 H11 H26 |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2006_04&r=cwa |
| By: | Morris Sebastian; Pandey Ajay; Barua Samir K. |
| Abstract: | The distortions in price based subsidisation are very severe. The direct fiscal cost of ensuring that a rupee of value is delivered to all household users of kerosene is as high as Rs.3 and when the consideration is the benefit that finally reaches the poor “below the poverty line” consumers it is much more. This is well known. This excludes the indirect costs in the form of negative externalities imposed by adulteration, and environmental costs. Worse still are the “third order” effects of entrenched rent seeking and corruption of distribution networks and the conversion of retailing to patronage. In such situation reform and deregulation become problematic. At the core of all these failures in the “price arbitrage” that arises when price based subsidies are resorted to. The total fiscal losses on account of kerosene subsidisation are in excess of Rs. 24,000 crore far above the conventional estimates (around Rs. 8000 – 10,000 crore) which do not recognise the fiscal cost of diversion and adulteration. This paper studies the current design of the public distribution system and price based subsidisation to bring out the perversities, and argues that a complete replacement is called for. The Public Distribution System (PDS) which had value in an era of shortage and rationing has no role today. Market based distribution can bring down the direct costs since now kerosene distribution could then enjoy the synergies of oil and provisions distribution channels. There is clear evidence that a significant percentage (about 40) of kerosene is diverted out of the PDS and sold at higher prices. The commission paid to the distribution channel, in particular to the retailers of kerosene does not make the business financially viable. The rents being earned by those associated with the distribution channel for kerosene are very large. The rent extractors have become so well entrenched over time that it is plausible that other agencies in the system and even the regulatory process itself may be hostage today to their influences. The indirect losses from use of sub-optimal fuel mix, product mix and investment decisions are very large and may harm the economy significantly in the long term. The subsidy through uniform low pricing of kerosene, though intended for the poor, is in fact not reaching them as they are in no position to buy much of the kerosene allotted to them even at the low issue prices being charged by the fair price shops. It is imperative to bring into play information and communication technologies so as to break the stranglehold of the distribution channel by capturing information at the point of sale and thereby creating a permanent audit trail of all relevant transactions. Only by empowering the target segment, the BPL families, by providing them with the freedom to choose the manner in which they would like to consume the subsidy intended for them can the problem be overcome. The well-documented failure of TPDS (Targeted Public Distribution System), implemented on an experimental basis, clearly demonstrates that tinkering with the existing system would not achieve the twin goal of benefiting the really poor and not-benefiting the non-poor. The direct subsidy scheme, which is based on free market pricing of kerosene, and therefore a radical departure from the current method of uniform low pricing is the answer for achieving effectiveness of subsidization. The subsidy is to be disbursed to the poor through smart cards and the accounting of disbursal is to be done using systems similar to those used by credit card companies. The purchasing power put in the hands of the beneficiaries would allow them to use it for spending on their choice of commodities and services and thereby not only enhance the use of subsidy to the full but would also add greatly to their welfare. The proposed system would almost completely eliminate the indirect losses arising from distorted choices since the price of kerosene would be market determined and therefore not relatively cheap compared to alternate fuels. A task force (TF) must be set-up for implementation, with wide-ranging powers and full financial backing of the government of India so as to be able to function autonomously. The task force should consist of eminently qualified individuals with diverse skills and known for their integrity and appreciation for the significance of the task to be performed. The critical task of identifying the beneficiaries at micro-level should be done using all possible sources of data and information (outlined in the report) so as to minimize both, Type I and Type II errors, that is, chance of exclusion of genuine beneficiary and chance of inclusion of spurious beneficiary in the list of target beneficiaries. There are interesting ways by which private information can be brought to bear, and incentive compatibility ensured in correct identification. The disbursement of subsidy should be such that the disbursement is recorded at the point of transaction and get immediately captured in a large centralized database, thereby creating a permanent audit trail, akin to operation of credit cards (details outlined in the report). The activities associated with initial identification of beneficiaries, disbursement of subsidies and updating the list of beneficiaries is to be done by well-qualified private agencies. The operations of the system should be monitored by an SPV to be specially created for the purpose and working under the broad supervision and direction of the task force. The SPV and the TF should ensure full transparency of operation of the private vendor and the scheme by making public all relevant information on the operation of the system and opting for periodic audit of operations. The appropriate organisation design and policy framework for the same is elaborated. The immediate gain to the exchequer from the proposed system, due to market based pricing of kerosene would be an estimated inflow of Rs. 14000 crore per year by way of additional taxes. This gain from additional taxes, based on certain assumptions, is expected to rise to over Rs. 37000 crore in 2010-11, at Jan. 2006 petroleum prices. The gain to the economy and society at large from elimination of indirect losses due to sub-optimal choices of fuel-mix, product-mix, and asset mix would be immense as they would be completely eliminated in the new system. The most important gain however is that the beneficiaries would be in a position to fully utilize their entitlements and spend the same on products and services of their choice, significantly enhancing thereby the utility of their consumption. This should also make direct subsidies politically rewarding. |
| Keywords: | Petroleum; Subsidies, India, Reform, Direct-Subsidies, Economic-Distortion, Microeconomics, Economic-Efficiency, Distribution, Targeting, Fiscal-Deficit, Government-expenditure, Public-distribution |
| JEL: | H2 |
| Date: | 2006–07–24 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:2006-07-06&r=cwa |
| By: | Swapan K. Bhattacharya; Biswanath Bhattacharyay |
| Abstract: | The seven-nation Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation (BIMSTEC), comprising Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand is emerging as one of the major subregional groups in Asia. Japan is the second largest trading partner for BIMSTEC countries. The paper discusses prospects for strengthening BIMSTEC countries and Japan’s cooperation and integration in trade, investment, and finance. It analyzes the trends and patterns of bilateral and subregional economic cooperation in Asia as well as BIMSTEC-Japan trade. It examines empirically whether BIMSTEC-Japan economic cooperation will increase intraregional trade using a gravity model. Japan-BIMSTEC cooperation will increase intraregional trade but not uniformly for all countries. The potential losses on trade for some countries will be compensated by gains in other areas, such as, stepped up resource transfer, foreign direct investment flows, technology transfer, and market access to services. The paper also presents the need for and possible areas of economic cooperation and integration in investment and finance. |
| JEL: | F02 F13 F15 F36 F40 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1725&r=cwa |
| By: | Klytchnikova, Irina; Diop, Ndiame |
| Abstract: | This paper analyzes the distributional impacts of trade reforms in rural areas of Bangladesh. The liberalization of trade in irrigation equipment and fertilizer markets during the early 1990s has led to structural changes in the agricultural sector and a significant increase in rice productivity. A resulting increase in output has been associated with a decline in producer and consumer rice prices of approximately 25 percent. Using a combination of ex-post and ex-ante approaches, the authors investigate the implications of the changes in rice productivity and prices for the welfare of households. They find that the net effects of increased rice productivity and lower rice prices have benefited the poor. Regardless of the particular category analyzed, the poorest households emerged as being particularly positively affected by reforms in the 1990s. This mainly reflects the fact that they are predominantly net rice buyers in both urban and rural markets. In contrast, large net sellers of rice, among the better-off households in the rural areas, were the main losers. Since net buyers in rural areas tend to be poorer than net sellers, trade liberalization has benefited the poor. Although the authors are not able to test empirically what has happened to the welfare level of agricultural wage earners, secondary evidence suggests that they have gained from trade liberalization. |
| Keywords: | Rural Poverty Reduction,Economic Theory & Research,Markets and Market Access,Crops & Crop Management Systems |
| Date: | 2006–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:3980&r=cwa |
| By: | Jacques Bouhga-Hagbe |
| Abstract: | Workers' remittances have been playing an increasingly important role in the balance of payments of many countries and can significantly contribute to the strength of their external positions. Assessing the likely stability of remittance flows could be a valuable input to the analysis of their external vulnerabilities. This paper argues that "altruism," as a motive to send money home, would contribute to the stability of these flows. Using a simple framework that relates workers' remittances to agricultural GDP, which is used as an indicator of economic "hardship" in the home country, evidence suggests that altruism could have played an important role in the flow of remittances to Egypt, Jordan, Morocco, Pakistan, and Tunisia in recent years. |
| Keywords: | Workers remittances , Egypt , Jordan , Morocco , Pakistan , Tunisia , Middle East and Central Asia , Balance of payments positions , |
| Date: | 2006–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/130&r=cwa |
| By: | Ercan Karadas; Defne Mutluer; Yasemin Barlas Ozer; Cevriye Aysoy |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:0602&r=cwa |