Finite Change—Implication for Trade Theory, Policy and Development

Marjit, Sugata; Mandal, Biswajit

doi:10.1007/978-81-322-2541-6_13

Cited by 6 publications

(4 citation statements)

References 17 publications

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“…The literature on finite change is quite extensive. One can refer to the works of Beladi et al (2016), Jones (2008Jones ( , 2014, Jones and Findlay (2000), Marjit and Gupta (2022), Marjit and Mandal (2016) and so forth. 7.…”

Section: Discussionmentioning

confidence: 99%

Customs Union, Wage Inequality and Welfare in General Equilibrium

Marjit

Sen

Gupta

2022

Foreign Trade Review

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The article attempts to consider the impact of a customs union formed between two small countries embedded in the global economy and trading in intermediates, in terms of a general equilibrium framework. It shows that with such a union both countries will gain, although there will be asymmetric effect on wage inequality. However, with higher capital stock the significance of the formation of customs union will be undermined. It also shows that perfect international capital mobility will lead to finite changes in the economy, shutting down the less capital intensive unskilled export sector in each country, which in turn makes the bilateral union irrelevant. Further tariff reduction will increase inequality in both countries. We have also considered the welfare effects of formation of customs union in the form of tariff cut and such a tariff reduction unequivocally improves welfare of the customs union irrespective of small country and large country assumptions, without any intra-union income transfer. JEL Codes: F02, F11, F55, F68

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Section: Discussionmentioning

confidence: 99%

Customs Union, Wage Inequality and Welfare in General Equilibrium

Marjit

Sen

Gupta

2022

Foreign Trade Review

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“…New traded sectors appear and disappear due to changes in competitive forces brought about by policy intervention. In the model, a new equilibrium is qualitatively different from the prechange situation (Beladi et al 2013;Marjit et al 2007Marjit et al , 2013Marjit and Mandal 2015;Das 2013Das , 2018Jones 2014Jones , 2018Marjit 1990).…”

Section: Emergence Of Contract Farmingmentioning

confidence: 92%

Contract Farming and Food Insecurity in an Open Competitive Economy: Growth, Distribution, and Government Policy

Das

Bhattacharyya

Marjit

2023

JRFM

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The paper explores the emergence and consequence of contract farming as a new subsector of agriculture in a small open developing economy, applying the theory of finite change in a general equilibrium framework. In this paper, we analyze the entry of a cash crop-producing foreign contract farming (CF) subsector within the agricultural sector of a country. Entry requires a cash crop price that is substantially above the price of the food crop already being produced within the country. CF (a) increases GDP and hence aggregate economic welfare; (b) may make income distribution more skewed; (c) reduces domestic production of food and hence, (d) increases food import and hence food insecurity. Thus, CF might imply a trade-off between inequality and growth. We employ a variant of the 3×3 mixed specific factor-Heckscher Ohlin general equilibrium model of production and trade where introduction of a new policy may lead to the emergence of a new sector resulting in finite changes where we show the possibilities of sectoral diversification with combinations of contract farming vis-à-vis traditional agriculture under some plausible conditions. Our results seem to be consistent when compared to some empirically robust conclusions found in the literature and some secondary data available on the FAO website. We also argue that the food insecurity problem gets aggravated as more and more countries engage in contract farming. Policy simulations identify critical parameters confirming the dominance of distribution over the growth effect in terms of a social welfare function. Simulations imply that there could be a food insecurity problem, as rises in GDP could result in increasing inequality so that government—to preserve social welfare—could restrict the extent of contract farming if non-food-producing sectors expand, causing terms-of-trade deterioration of food-importing nations.

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“…This is the novel feature in this model where the quasi-specific types move. As Covid-19 shock disrupts a sector, economic rents tend to disappear due to permanent changes in commodity prices (Ruffin 1981(Ruffin & 2001. 5 The rationale is that prolonged closure of works, uncertainties about unemployment induces the skilled workers switching to alternative occupation.…”

Section: Rudimentary Modelmentioning

confidence: 99%