Suppose a developing country has the choice of importing cars (I), or producing them at home in a subsidiary (S) of a transnational company, or in a domestic firm under a licensing (L) contract from a transnational which ties the import of components from the latter. If the criterion of national benefit is given by consumer surplus under I or S and by consumer surplus plus the profits of the domestic firm under L, we compare the benefits from the alternative regimes I, S, or L under different market structure assumptions. In most cases the regime S seems to dominate. The conclusions are then modified by pointing to factors excluded from the basic model.

In much of the theoretical literature on development the standard assumption is that of a constant wage in agriculture. In this paper we cite some evidence, obtained in our detailed analysis of a recent large-scale survey of rural labor households by the National Sample Survey in India, of how the existing theories of wage determination by biological or institutional factors leave much to be explained in terms of the observed data. We then proceed to construct a modified theoretical framework which generate comparative-static hypotheses which seem to be consistent with many of the stylized facts.

The paper uses individual farm-level data for nearly 1,000 Indian farms to analyze (a) the well-known inverse relationship between farm size and output per acre, (b) returns to scale, and (c) imperfections in the labor market. One major result is that while predominantly wheat areas show constant returns to scale, diminishing returns seem to prevail in predominantly paddy areas. But both in paddy and wheat agriculture the observed negative relation between output per acre and farm size is likely to be the result more of an inverse relation between size and other inputs than of scale diseconomies. In the last section of the paper we discuss factors that may have contributed to this inverse relation, some of these involving production uncertainty in agriculture and some others involving the interlinked phenomenon of land- and labor-market imperfections.

We investigate political determinants of land reform implementation in the Indian state of West Bengal. Using a village panel spanning 1974–1998, we do not find evidence supporting the hypothesis that land reforms were positively and monotonically related to control of local governments by a Left Front coalition vis-à-vis the right-centrist Congress party, combined with lack of commitment to policy platforms. Instead, the evidence is consistent with a quasi-Downsian theory stressing the role of opportunism (reelection concerns) and electoral competition.

135 Despite the importance of this issue, not much systematic research appears to have been devoted to assessing the relative susceptibility of national and local governments to interestgroup capture. Here we describe a model of two-party electoral competition with “probabilistic” voting behavior and lobbying by specialinterest groups based on David Baron (1994) and Gene Grossman and Elhanan Helpman (1996) that helps identify determinants of relative capture at different levels of government. These include relative levels of voter awareness and interest-group cohesiveness, electoral uncertainty, electoral competition, heterogeneity of districts with respect to inequality, and the electoral system. While some of these uphold the traditional Madisonian presumption, others are likely to create a tendency for lower capture at the local level, so the net effect is theoretically ambiguous. This suggests that the extent of relative capture may be context-specific and needs to be assessed empirically.