Technical Papers ⁽¹⁷⁾

Read paper The 4-quadrant diagram is remarkable for its ability to represent succinctly and precisely the full equilibrium in the two-good, two-factor, two-country Heckscher-Ohlin(H-O) model. With four factor allocations, two outputs and two factor prices in each country and the common goods price, the model has 17 variables in all. The diagram manages to explicitly show the equilibrium value of the key variables explicitly, with the remaining ones determined indirectly.I first introduce the basic diagram as applied to the autarky equilibrium. I the nextend it to the two-country equilibrium and briefly mention further applications. In the penultimate section, I give a brief history of the diagram

Read paper I point out several flaws in the recent study by Robin Burgess and Rohini Pande (AER 2005) linking the bank branch expansion to poverty reduction in India during 1977-90. The authors miss some critical details of the policy and, more importantly, fail to recognize that it was the credit policy and anti-poverty programs that drove the branch expansion rather than the adoption of a specific branch expansion rule. These facts greatly undermines the identification strategy of the authors while giving rise to the omitted variables problem.

Read paper (with Nuno Limao--revised version forthcoming in the JIE) An enduring puzzle in international economics is why trade interventions are biased in favor of import-competing rather than exportable sectors and therefore restrict trade. In this paper, we show that if the government's objective reflects a concern for inequality then trade policy generally exhibits an anti-trade bias. Importantly, under neutral assumptions, the mechanism that we analyze generates the anti-trade bias independently of whether factors are specific or mobile across sectors. The mechanism also generates an anti-trade bias between large countries even after they sign reciprocal trade agreements that eliminate any terms-of-trade motivation for the use of trade protection.

Read paper (revised version forthcoming in the Brookings Trade Policy Forum 2006): The paper considers separately the welfare of the source and destination countries as also the migrant. It also makes a distinction between temporary and permanent migration on the one hand and skilled and unskilled migration on the other. It argues that skilled emigration is likely to be potentially damaging to the small developing countries such as Jamaica that stand to lose a significant proportion of their skilled labor force to it but will on balance be beneficial to the large developing countries such as India and China. The paper also questions the wisdom of the recent suggestions of a development strategy that relies primarily on temporary migration.

Read paper (AER Papers and Proceedings May 2002): The paper focuses on the static costs of protection and argues that the estimates based on the traditional neoclassical model are small because they typically measure the cost of low levels of protection. The cost of high levels of protection can be very high. Alternatively, in the presence of scale economies, endogenous determination of product variety, X-efficiency effects and Directly Unproductive Profit-seeking activities, even low levels of protection can lead to high costs. A longer version of the paper is available below under the title "Alternative Approaches to Measuring the Cost of Protection."