ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Neeraj HatekarSubscribe to Neeraj Hatekar

Rise of the New Middle Class in India and Its Changing Structure

After being largely stable between 1999–2000 and 2004–05, the new middle class in India (that is, those spending between $2 and $10 per capita per day) doubled in size between 2004–05 and 2011–12, amounting to nearly half of India’s population. This growth, though largely in the lower middle class category, happened across a majority of states in both rural and urban areas. Structurally, the new middle class is quite different from the conventional understanding of it. Although dominated by upper castes, other caste groups too have entered the new middle class in large numbers. The occupational structure within the class is heterogeneous. The lower middle class is engaged in occupations similar to that of the poor, whereas the upper middle class is involved in traditional service activities as well as in new knowledge services.

CPI to WPI Causation

The causal relationship between consumer price index and wholesale price index has been the focus of several econometric studies. The CPI could drive the WPI when producers follow mark-up pricing and when wages increase. These could be due to supply shocks that lead producers to hike prices, thereby also increasing consumer prices, which in turn could lead trade unions to demand higher wages--leading to higher WPI. Alternately if consumer expenditure rises in response to a positive income shock--increasing the demand for goods--it can lead to a rise in the derived demand for labour and subsequently wages. The present study attempts to (i) empirically test for the causal influence of CPI on WPI in the frequency domain, and (ii) test whether the observed CPI to WPI causation is demand-driven or driven by supply shocks.

Culture, Community and Institutions

Mainstream economic theory holds that economic agents are purely self-interested players. However, individual preferences could be socially determined by sustained enculturation in contexts that emphasise and applaud cooperative behaviour that may lead to pro-social individual preferences. If this is the case, communities with long-established social norms of cooperation might make individuals behave more cooperatively even when selfish behaviour is guaranteed to go unpunished. Can communities where the norm of cooperation is culturally embedded solve social dilemmas better than communities which lack such cultures? Can such cultures be engineered in a relatively short span of time? These questions were evaluated through a finitely repeated public good game in two model villages of Maharashtra, known for local development achieved through voluntary labour, and two villages lacking such a history. We observed higher contributions to public goods in communities with histories of cooperation. And found that variations across individuals were significantly higher than variations across villages, indicating that village-wide cultures may not be as important as individual-level preferences.

Inequality, Income Distribution and Growth in Maharashtra

The inter-district inequality of per capita incomes in Maharashtra for the period 2001-09 is analysed here and it is found that inequality rose for the period 2001-05 and subsequently declined. Though it has been rising, it is at a lower level than that observed for 2001-05. This has been accompanied by shifts in the relative ranking of different districts across the income distribution. Data does not point to the convergence of per capita incomes across districts. The historical composition of incomes, in particular the share of the tertiary sector in GDP, is an important predictor of divergence in district per capita incomes.

Stereotypical Occupational Segregation and Gender Inequality

This paper attempts to distinguish "trust in cooperation" and "trust in ability" with respect to gender in an experimental trust game. "Trust in ability" with respect to gender is explored in the context of hands-on mechanical ability where females are stereotypically believed to be inefficient. Such stereotypes govern, directly or indirectly, women's access to education and employment, resulting in occupational segregation of the labour market. All this further intensifies gender inequality. We observed higher probability of exhibiting stereotype among men and women paired with other women, despite a statistically insignificant gender gap in actual mechanical performances. This indicates that "trust in ability" can be governed by such stereotypes and affect economic outcomes. We seek causes of the prevalence of gender stereotype in evolutionary psychology. We also describe the demotivating psychological process women suffered from, due to endorsement of such stereotypes by society.

Paanwalas in Mumbai

How institutions frame economic transactions is crucial to the ability of the poor in the informal sector to fi nd their way out of poverty. The literature points to two crucial aspects of the lived reality of the urban informal sector: the network of social relationships and property rights. This article investigates the manner in which the two interact to determine earning opportunities in the urban informal sector. The study is based on a sample of informal sector paanwalas or retail paan shops across Mumbai. We point out the signifi cant role continuous access to physical space, the arena where property rights and social capital interface, plays in determining earnings.

R for Econometrics

Hands-on Intermediate Econometrics Using R: Templates for Extending Dozens of Practical Examples by Hrishikesh D Vinod (World Scientific), hardcover, pp xxvii + 512, $ 94.

Experimental Economics: A Survey

Over the past few decades, experimental methods have given economists access to new sources of data and enlarged the set of economic propositions that can be validated. This field has grown exponentially in the past few decades, but is still relatively new to the average Indian academic. The objective of this survey is to familiarise the Indian audience with some aspects of experimental economics. The survey attempts to bring to the interested reader a flavour of this field. The survey is presented in five separate articles after this introduction. The notes and references for all articles are at the end of the survey.

Emergence of Experimental Economics

The survey begins, in Part 1, with a presentation of the historical emergence of the subject and provides the methodological justification for economics experiments. In presenting the history of the field, Part I also discusses the forces that impelled or impeded its evolution.

Experiments in the Indian Context

Over the past few years, experimental economics has become increasingly visible in research activity in India.The concluding part of this survey offers a brief overview of experiments conducted in the Indian context. These have been largely field experiments.

Experiments on Individual Decision-Making

Part 2 of the survey looks at experimental results dealing with individual choice. The discussion compares the two dominant experimental methodologies that govern individual decision-making experiments in social science. It then discusses decision-making experiments under two main heads - the psychology-oriented experiments (or what has now morphed into behavioural economics) and experiments that test observed behaviour against theoretical benchmarks derived from neoclassical microeconomic theory. The last section provides an overview and looks ahead to the future of experiments in decision-making.

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