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No. 339

April 2005





Tax Shifting,Economic, Growth, and welfare Maximization

Tai-Yung Kam
Ching-Huei. Shieh

This paper re-examines Barro's (1990) result of maximizing the economic growth rate is equivalent to maximizing social welfare in the context where the government adopts a tax-shift policy. The results show that at the steady-growth equilibrium,consumption, capital, output, and government expenditure grow at the same rate. The economic growth reaches its maximum when the consumption taxes rate approaches to infinity. However, the effect of tax-shift on social welfare is ambiguous,it depends on the interaction of two opposite forces. The social welfare reaches its maximum while the consumption tax rate is somewhere less than infinitive. We conclude that social welfare maximizing policy is not equivalent to maximizing the economic growth.

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Foreign Capital Inflows and skill-Formation with the Without Technology Transfer: A Theoretical Analysis

Anirban Paul
Kausik Gupta

In a simple three sector extension of the HOS-framework with foreign enclave as the third sector, we analyse the effects of foreign capital inflow on skilled-unskilled              wage-gap, skill formation and welfare separately in the absence and presence of technology transfer. We have shown that whereas without technology transfer, inflow of foreign capital raises wage rate of skilled labour, it may also lower the same under transfer of technology. In both the cases we have derived the sufficient conditions for the skill-formation and welfare-rise..

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Varuiation of Wholesale Price Indices of India's Manufactured Products 1989-1999 

H. Raman

In the theory of price, the only macro aspect is the determination of changes in the aggregate price level per unit of time. Therefore one of the important objectives of monetary policy is to attain price stability with a tolerable rate of inflation. As opined by Milton Friedman (1960's1,monetary policy will affect prices with 'long and variable lags' .Nevertheless, both the monetary and credit policies of Reserve Bank of India differently affect the prices of various groups of commodities in the frame work of fiscal and the balance of payments situation prevailing in a particular span of time. Regarding price movements, the wholesale price indices and the consumer price indices of commodities are not very often moving closely and there is variation in the indices among different types of commodities even within the same group. As such, the prices within the group may vary in accordance with the nature of individual commodities. Therefore, an attempt has been made in this paper to find out the extent of variation in the indices of manufactured products during the period between 1989-90 to 1998- 99.

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Sales Tax Incentive and Industrial Growth 

Ashok M. Agrawal
Mrs. Rashmi Ojha sharma

Every government thrives to bring about balanced regional development through industrialization as it was realized that industrialization alone, if done in a planned manner, can bring about balanced regional development. India and many of its state governments have been providing various incentives to encourage entrepreneurship, disperse industries in backward areas, provide competitive strength, give stimulus to industries, etc. with the main objective to bring about regional balance. In this direction Government of Maharashtra took the lead by introducing Package Scheme of Incentives for industries in 1964 which has been amended from time to time depending on changes in the needs of the entrepreneurs. 

The study is done with special reference to Maharashtra as it is the pioneer in introducing the scheme and is recognized as one of the most developed states on various socio-economic parameters. The Government of Maharashtra has been providing various incentives in its PSI but one incentive which has remained common is the Sales Tax Incentive, though the form, quantum and ceilings kept changing from Scheme to Scheme. Just recently in PSI 2001 the government removed this incentive bowing to the pressure from other state governments and Central Government. The study is done with the main objective of analyzing the role of Sales Tax Incentive in helping disperse the industries and for this study is also made regarding the expected outcome of Sales Tax Incentive in different regions depending upon the level of industrialization the problems connected with it, role of Implementing Agencies i.e., SICOM and DlC with regard to LSI/MSI and SSI respectively, role of supportive agencies i.e., the Sales Tax Department affecting the success of PSI, operational problems, and problems faced by entrepreneurs in availing of incentive. 

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Financial constraints, Inventory Investment, and Fixed Capital

T. V. S. Ramamohan Rao

In a series of empirical studies, Fazzari and Petersen (FP) and their associates examined the substitutability between the stock of fixed capital and inventory investment of firms when they encounter short run and/or sporadic financial constraints. They consider the cashflow constraint as the major source of adjustments. In addition, they argue that firms cannot forego investment opportunities in the interest of maintaining a stable market share in the long run. Hence, inventory investment is expected to bear the brunt of the adjustment. The firm has many more options if the financial constraints persist. A more satisfactory theoretical explanation for the relationship between the financial constraints and investments in inventories and fixed capital is therefore necessary. This study sets up a comprehensive theoretical framework and demonstrates that changes in cost of production and other logistic costs will be the primary channel through which financial constraints affect investment in inventories and fixed capital. Many other important insights into the transmission mechanism have been highlighted.

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 Production Function Forms under Technology Gap:Evidence from Public Accounting Firms in Taiwan 

Bao-Guang Chang
Yahn-Shir Chen

Functional form of production under technology gap in the same industry, a less discussed topic in literature, is investigated in this paper. To enrich this line of theories, the technology pattern of production function of public accounting firms in Taiwan under different technology level is examined. The main findings are as follows. Public accounting firms with different technology level show different functional forms of production during two sub-periods of 1989-1995 to 1997-2000. Due to potential structure shift in economy, the functional form of production for large firms with high-tech level resembles variable elasticity of substitution pattern during the former sub-period and is exactly variable elasticity of substitution pattern during the latter sub-period. For small ,firms with low-tech level, their functional forms of production remain to be the constant elasticity of substitution pattern during both sub-periods.

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 Performance and Cost-efficiences of the General Insurance Corporation of India: 

Rabindra N. Bhattacharya ,Shyamal Paul
Suparna Sanyal

The general insurance business in India was nationalized in 1972. Now this business is on the way of liberalization. It is imperative to undertake some in-depth study of this business to identify the rationale of -the recent developments. This paper is a partial and modest attempt to such a study about the performance of the general insurance business in India. In this paper we examine the performance of the General Insurance Company of India (GICI) from the perspective of scale efficiency. This analysis is based on data over the period 1990-91 through 1999- 2000 and across the five units of the GICI namely, National Insurance, New India Assurance, Oriental Insurance, United India Insurance and GIC itself.

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 Resource Use Efficiency and return from selected Foodgrain crops of Himachal Pradesh : A Study of low Hill Zone

Sikander kumar
Sandeep Kumar

The main aim of production unit is to co-ordinate and utilize resources or factors of production in such a manner that together they yield the highest net returns. The paper present a study of the resource use efficiency of key factors of production returns to scale and profitability of the selected foodgrain crops in Himachal Pradesh. To make Himachal agriculture cost efficient, it is suggested that farmers should use more of HYV seeds, insecticides and pesticides, bullock labour and tractorization, improved implements etc. to turn out negative returns into positive. Again, consolidation of land holdings and a redistribution of land in favour of marginal and small farmers will undoubtedly help in increasing the agricultural production, productivity and rural employment in the state.

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