Collaboration

Lead RMIT University Researcher: Alberto Posso

India is a mega-biodiversity centre with two of the world’s 18 ‘biodiversity hotspots’ located in the Western Ghats and in the Eastern Himalayas. Anthropogenic climate change caused by increasing human population, consumption, and resources usage is becoming an important source of shocks to people that rely on the environment for their livelihoods. The rise in frequency of floods, droughts and extreme weather in the Indian subcontinent in recent years is testament to the severity of this problem. These shocks are relatively more severe for poor and vulnerable households, which directly depend on agriculture, biodiversity and the environment for food, income and shelter.

The proposed research aims to look at variations in temperatures and other climatic shocks using GIS secondary data and analysing households’ coping mechanisms and sources of vulnerability. The research will also consider gendered and cultural characteristics that determine the success and failure of various coping strategies. Given that environmental shocks potentially disrupt labour supply and infrastructure, the research team will also discuss the importance of these shocks to the wider economy with particular emphasis on international trade. Overall, the project will highlight effective responses to various environmental shocks in each region. The research will take place in villages that have been adopted by Amrita Vishwa Vidyapeetham as part of their live-in-labs programs. This will provide readily available and diverse source of information across India.

The research team will provide practical and achievable evidence-based policy advice immersed within existing institutional and cultural structures. This is a new way of formulating economic policy, where grass-roots based policies that build on communal and local strengths, rather than imposing alien institutional frameworks, are recommended in order to provide higher levels of effectiveness.

Since the publication of Thomas Piketty’s Capital in the Twenty-First Century in 2013, the issue of income inequality has again come to the fore around the world, both in industrialized and developing countries. The detrimental effects of high inequality are well-known. It slows down economic development, weakens political institutions, and can also trigger violence. While policy experts have a good understanding of inequality dynamics at the national level, what is less well known is how inequality shapes our societies at the local level. The proposed research hopes to fill this gap, which is of particular relevance in the Indian context, where both poverty and inequality are pressing issues.

Local-level inequality is an understudied topic. In order to obtain reliable measures of inequality at the local level, reliable GDP accounts at the regional level are necessary. Developing countries, however, lack the financial resources and statistical capacity to collect accurate, frequent income data for rural citizens, restricting all policy discussions to a very cursory level. Reliable local-level inequality data will allow us to investigate the relationship between inequality and local development, but also whether inequality triggers violence, especially during economic crises. Other potential studies could examine location decisions by skilled workers, or seek to identify which local political institutions areas are most at risk of weakening.

Lead RMIT University Researcher: George Tawadros

Since the start of the 21^st century, inflation in India has mirrored its relative macroeconomic stability. For instance, between 2000 and 2006, the CPI averaged just 4 per cent during a period where growth and investment began a secular acceleration and external imbalances narrowed rapidly. However, that relative stability in the CPI began to change in 2006, when it rose dramatically by an average of more than 9 per cent between 2006 and 2013. The stickiness of inflation coincided with greater global economic pessimism: the post-Lehman growth rebound was temporary, external imbalances began to widen as households flocked to physical assets and gold, and the Indian rupiah came under sustained depreciation pressures, with things coming to a head when the Federal Reserve tapered one of its Quantitative Easing programs in 2013.

However, as rigid as the CPI was between 2006 and 2013, its fall has been just as dramatic. After peaking at 12.1 per cent in November of 2013, the CPI collapsed to 4.3 per cent in December 2014, a fall of almost 8 per cent in only 13 months, before increasing to 5 per cent in October, 2015. This dramatic decline in the CPI has led to two important and related questions. First, what was responsible for the sharp decline over the last two years? And second is this decline in the CPI sustainable, or is it transitory?

Answers to these questions are not trivial, given the global and domestic events during this period. The disinflation over the last two years has occurred when global oil and commodity prices have collapsed, food prices have fallen sharply, the implementation of a new monetary policy regime by the Reserve Bank of India to anchor inflation expectations, a new Government working on alleviating food supply bottlenecks, and the continued restraint on agricultural support prices. So how does one ascertain the extent to which different factors contributed to this disinflation? The purpose of this study will be to analyse this dramatic decline in inflation, and quantify the contribution of the different factors in explaining the recent reduction in inflation that has occurred in India, using an augmented Phillips curve. The CPI (and inflation) will also be disaggregated by State and rural/urban location to examine the importance of inflation to those living in poverty and potential impacts that changes in inflation can have on their lives.

Lead RMIT University Researcher: Sefa Awaworyi-Churchill

Relying on national and cross-country level data, the existing literature has thus far explored a myriad of plausible mechanisms through which ethnolinguistic diversity works to impair the attainment of optimal social and economic outcomes. This strand of literature is said to present what is now known as the diversity-deficit hypothesis. The diversity-deficit hypothesis is so well-grounded empirically that as Gisselquist, Leiderer, and Niño-Zarazúa (2016) puts it, asking whether diversity has negative implications for socioeconomic outcomes in today’s literature appears irrelevant. Instead, understanding why these relationships exists, i.e. the factors that underlie diversity’s harmful effects on social outcomes seem to be a more optimal direction for future research.

However, in a survey of the literature, it is evident that when micro data is employed, the evidence generally contrasts the conventional wisdom of diversity-deficit/debit. Thus, despite the wide-spread evidence of a negative effective of ethnic diversity using cross-country aggregate data, micro level evidence tends to support the diversity-dividend hypothesis (i.e., a positive effect). For example, using highly disaggregated community-level data from the developing world, Gerring, Thacker, Huang, and Lu (2011) find that ethnic and religious fractionalization is often associated with desirable socioeconomic outcomes. Similar evidence is presented by Gisselquist et al. (2016) using district-level data for Zambia. They show that ethnic fractionalization has a positive relationship with some key welfare outcomes. Hopkins (2011) also finds mixed effects of diversity on social spending in U.S cities. These findings have ignited the academic discourse on re-examining the diversity-debit hypothesis, with renewed emphasis on micro level evidence.

Accordingly, the aim of this project is to examine the effects of ethnic diversity on a wide range of social and economic outcome variables using micro level data from India. Outcomes of interest include income, poverty, health, inequality, educational attainment, subjective wellbeing, and social capital among others.