The Rise and Fall of India's Relative Investment Price: A Tale of Policy Error and Reform

• 成果类型: Article
• 署名作者: Johri, Alok; Rahman, Md Mahbubur
• 署名单位: McMaster University; Statistics Canada
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20180411
• 发表日期: 2022
• 页码: 146-178
• 关键词: economic-growth; capital goods; TRADE; LIBERALIZATION

摘要

India's relative price of investment rose 44 percent from 1981 to 1991 and fell 26 percent from 1991 to 2006. We build a simple DGE model, calibrated to Indian data, in order to explore the impact of capital import substitution policies and their reform post-1991 in accounting for this rise and fall. Our model delivers a 23 percent rise before reform and a 31 percent fall thereafter. GDP per effective labor was 3 percent lower in 1991 compared to 1981 due to import restrictions on capital goods. Their removal, and a 71 percentage point reduction in tariff rates, raised GDP per effective labor permanently by 20 percent.