Factor markets and resource allocation in colonial Punjab

It is often argued that agricultural factor markets in colonial India were underdeveloped, leading to inefficient resource use and slow agricultural development. However, there is little econometric evidence on these issues. This article outlines a model which incorporates the factor market imperfections discussed in the literature and tests the model against data from the Punjab. There is, in the statistical sense, evidence of resource misallocation; however, these effects are too small to be of much economic significance.     

Measurement of causal effects

Three types of stochastic coefficient models can be identified: models with “individually-varying”, “time-varying” and “individually- and time-varying” coefficients. A parameterized stochastic coefficient environment is well suited to measure the causal effects of the explanatory variables on the dependent variable of a law. This environment captures the unknown true functional form of the law as a special case. In the presence of omitted variables and measurement errors, each coefficient of the law stated in terms of only included variables is the sum of the bias-free term and omitted variables bias with or without measurement-error bias. A method of separating the bias-free term from these biases is developed. This method is shown to be different from the instrumental variables method by showing that the instrumental variables do not exist. Laws are also shown to be different from regression models. Models having lagged dependent variables and the current and lagged values of explanatory variables as its regressors are used for policy analysis and testing for Granger causality in the econometric literature. These models are shown to be non-parsimonious relative to certain types of time-varying coefficient models without lagged dependent variables and are shown to lead to identification problems.     

Governance and Growth: A Simple Hypothesis Explaining Cross-Country Differences in Productivity Growth

Cross-country evidence shows that a subset of developing countries isgrowing very rapidly, taking advantage of opportunities to ``catch-up'' atthe same time that other developing countries are growing slowly. We arguethat this is due to differences in the quality of governance. Inparticular we show that productivity growth is higher in better-governedcountries.