Shankha Chakraborty
University of Oregon, Economics, Faculty Member
Research Interests: Computer Science, Economics, Development Economics, Macroeconomics, Economic Theory, and 12 moreUnemployment, Moral Hazard, Social Science Research Network, Labour Market, Capital Accumulation, Credit Market, E, Overlapping Generations Model, Labor and Demographic Economics, Unemployment rate, Information Frictions, and Financial Institutions and Services
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Research Interests: Economics, Monetary Economics, Macroeconomics, Economic Theory, Income Distribution, and 12 moreApplied Economics, Income inequality, Financial System, Moral Hazard, Profitability, Theoretical Analysis, Endogenous Growth, Growth rate, Market Finance, Agency Problem, Per Capita Income, and Profitability Index
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This paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost of rent seeking, only wealthy agents choose to engage in... more
This paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost of rent seeking, only wealthy agents choose to engage in it, since it enables them to protect ...
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International audienc
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Authorized for distribution by Hugh Bredenkamp This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent
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We provide a new explanation for sub-Saharan Africa’s slow demographic and economic change. In a model where children die from infectious disease, childhood health affects human capital and noninfectious-disease related adult mortality.... more
We provide a new explanation for sub-Saharan Africa’s slow demographic and economic change. In a model where children die from infectious disease, childhood health affects human capital and noninfectious-disease related adult mortality. When child mortality falls from lower prevalence, as in western Europe, labor productivity improves, fertility falls and the economy prospers. When it falls mainly from better cures, as in sub-Saharan Africa, survivors are less healthy and there is little economic payoff. The model quantitatively explains sub-Saharan Africa’s experience. More generally it shows that life expectancy at birth is a poor indicator of population health unless morbidity falls with mortality
2005 This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers... more
2005 This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost of rent seeking, only wealthy agents choose to engage in it, since it enables them to protect their wealth from expropriation. Hence, the level of rent seeking and economic performance are determined by the initial distribution of income and wealth. When individuals also differ in their productivity, not all wealthy agents become rent seekers and the social costs of rent seeking are typically lower. In both cases, multiple equilibria with different levels of rent seeking a...
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Numerous researchers have incorporated labor or credit market frictions within simple neoclassical models to (i) facilitate quick departures from the Arrow-Debreu world, thereby opening up the role for institutions, (ii) inject some... more
Numerous researchers have incorporated labor or credit market frictions within simple neoclassical models to (i) facilitate quick departures from the Arrow-Debreu world, thereby opening up the role for institutions, (ii) inject some realism into their models, and (iii) explain cross country differences in output and employment. We present an overlapping generations model with production in which a labor market friction (moral hazard) coexists along with a credit market friction (costly state verification). The simultaneous presence and interaction of these two frictions is studied. We show that credit frictions have a multi-plier effect on economic activity, by directly affecting investment and indirectly through the unemployment rate. The labor market friction, on the other hand, affects unemployment in the short- and long-run but has only a short-run effect on capital accumulation.
This paper examines the impact of adult mortality on the pattern of investment and economic development. In the presence of high mortality risks and imperfect annuities market, altruistic parents invest more in tangible assets (physical... more
This paper examines the impact of adult mortality on the pattern of investment and economic development. In the presence of high mortality risks and imperfect annuities market, altruistic parents invest more in tangible assets (physical capital, land) that are readily transferable to future generations compared to intangible human capital. This differential effect of mortality can translate into divergent growth paths for economies, differing willingness to adopt modern skill-intensive technologies as well as a late transition from physical to human capital accumulation. Parental altruism can substitute for the absence of annuities reasonably well: investment in tangible assets is typically higher under missing annuities.
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We propose an economic theory of infectious disease transmission and rational behavior. Diseases are costly due to mortality (premature death) and morbidity (lower productivity and quality of life). The theory offers three main insights.... more
We propose an economic theory of infectious disease transmission and rational behavior. Diseases are costly due to mortality (premature death) and morbidity (lower productivity and quality of life). The theory offers three main insights. First, higher disease prevalence implies lower saving-investment propensity. Preventive behavior can partially offset this when the prevalence rate and negative disease externality are relatively low. Secondly, infectious diseases can generate a low-growth trap where income alone cannot push an economy out of underdevelopment, a result that differs from development traps in the existing literature. Since income per se does not cause health in this equilibrium, successful interventions have to be health specific. Thirdly, a more favorable disease ecology propels the economy to a higher growth path where infectious diseases are eradicated. Even so, diseases can significantly slow down convergence to this growth path. Taken together, our results sugges...
The epidemiologic transition offers a novel explanation for developing countries' sluggish demographic transition, their high non-infectious disease burden and slow growth. In a three-period overlapping generations model of endogenous... more
The epidemiologic transition offers a novel explanation for developing countries' sluggish demographic transition, their high non-infectious disease burden and slow growth. In a three-period overlapping generations model of endogenous mortality and fertility, infection in early childhood affects health human capital and late-life mortality from non-infectious disease. Child mortality is the product of disease prevalence and fatality from infections. When it falls due to lower prevalence of infectious disease, as it did in western Europe, a quantity-quality tradeoff lowers net fertility and raises human capital investment. Accompanied by higher adult longevity, an epidemiologic transition and economic growth follow. When child mortality falls mainly due to better survival from infections, as in developing countries, life expectancy at birth improves but adult mortality remains high and more surviving children are of lower quality. Demographic, epidemiologic and economic transitio...
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Population aging – falling fertility coupled with rising longevity – is expected to slow economic progress. Directed technological change may (partly) redress the problem. In an R&Dbased general equilibrium life cycle model, technology... more
Population aging – falling fertility coupled with rising longevity – is expected to slow economic progress. Directed technological change may (partly) redress the problem. In an R&Dbased general equilibrium life cycle model, technology responds to factor scarcity brought about by a higher dependency ratio. Falling fertility shrinks the workforce, causing wages to rise. Rising longevity, in contrast, expands the supply of capital, lowering its cost. This change in relative prices causes technology to become more capital-biased. That effect is somewhat attenuated if rising longevity also encourages human capital accumulation. Quantitative results show that the net effect depends on credit market distortions, the importance of intergenerational transfers and how much of population aging is due to rising longevity versus falling fertility.
Young individuals can undertake one of two types of preventive health investment, xt ∈ {0, x}. Diseases spread from infected older individuals to susceptible younger ones. A susceptible young person randomly meets μ > 1 older... more
Young individuals can undertake one of two types of preventive health investment, xt ∈ {0, x}. Diseases spread from infected older individuals to susceptible younger ones. A susceptible young person randomly meets μ > 1 older individuals during the first half of his youth, before old infected agents start dying. Not all of these older individuals will be infected and not all encounters with infected people result in transmission. For the time being, let us assume that the probability of being infected (pt) after these μ encounters is given by p(xt) = μπ(xt)it, (1)
Research Interests: Economics, Financial development, Income Distribution, Wealth Distribution, Industrialization, and 13 moreFinancial System, Moral Hazard, Social Science Research Network, Inequality, Financial, Non Banking Financial Institutions, Market Finance, Bank Finance, Bank Loans, Credit Market, Financial Structure, Dynamic stochastic general equilibrium model, and Investment Risk
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This paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost to rent seeking, only wealthy agents choose to engage in... more
This paper examines the relationship between rent seeking and economic performance when governments cannot enforce property rights. With imperfect credit markets and a fixed cost to rent seeking, only wealthy agents choose to engage in it, as it allows them to protect their wealth from expropriation. Hence, the level of rent seeking and economic performance are determined by the initial distribution of income and wealth. When individuals also differ in their productivity, not all wealthy agents become rent seekers, and the social costs of rent seeking are typically lower. In both cases, multiple equilibria with different levels of rent seeking and production are possible. Copyright 2006, International Monetary Fund
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This article proposes a tractable model of the evolution of financial structure. Firms invest out of internal assets and by borrowing from banks and the financial market. In the presence of moral hazard, whereby owner–managers may... more
This article proposes a tractable model of the evolution of financial structure. Firms invest out of internal assets and by borrowing from banks and the financial market. In the presence of moral hazard, whereby owner–managers may intentionally reduce profitability of investment to appropriate resources, banks can monitor firms and partially alleviate agency problems. Under the optimal financial contract, banks monitor and outside investors lend to firms only if they borrow from banks too. The model is broadly consistent with financial development facts. Capital accumulation is facilitated by an increasing reliance on both types of external finance. Initially firms rely more heavily on expensive bank finance. With further development, banks eliminate much of the agency problem and firms substitute in favour of cheaper market finance. The short- and long-run effects of financial sector reforms are considered. JEL: E44, G20, O16
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In a life-cycle model with dynastic households, parents value the transfer of tangible assets to their offspring in the event of premature death. This raises the subjective reward from investing in them relative to intangible human... more
In a life-cycle model with dynastic households, parents value the transfer of tangible assets to their offspring in the event of premature death. This raises the subjective reward from investing in them relative to intangible human capital and tilts investment choice away from the latter. These effects of mortality on human capital risk and relative investment can translate into divergent growth paths, delayed transition from physical to human capital accumulation, and a dampened response to mortality shock in developing countries.
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We propose an epidemiological overlapping generations model where the transmission and incidence of infectious diseases depend on economic incentives and rational behavior. The economic cost of diseases comes from their effect on... more
We propose an epidemiological overlapping generations model where the transmission and incidence of infectious diseases depend on economic incentives and rational behavior. The economic cost of diseases comes from their effect on mortality (infected individuals can ...
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We propose an epidemiological overlapping generations model where the transmission and incidence of infectious diseases depend on economic incentives and rational behavior. The economic cost of diseases comes from their effect on... more
We propose an epidemiological overlapping generations model where the transmission and incidence of infectious diseases depend on economic incentives and rational behavior. The economic cost of diseases comes from their effect on mortality (infected individuals can ...
We study the dynamics of poverty and health in a model of endogenous growth and rational health behavior. Population health depends on the prevalence of infectious diseases that can be avoided through costly prevention. The incentive to... more
We study the dynamics of poverty and health in a model of endogenous growth and rational health behavior. Population health depends on the prevalence of infectious diseases that can be avoided through costly prevention. The incentive to do so comes from the negative effects of ill health on the quality and quantity of life. The model can generate a poverty trap where infectious diseases cycle between high and low prevalence. These cycles originate from the rationality of preventive behavior in contrast to the predator–prey dynamics of epidemiological models. We calibrate the model to reflect sub-Saharan Africa's recent economic recovery and analyze policy alternatives. Unconditional transfers are found to improve welfare relative to conditional health-based transfers: at low income levels, income growth (quality of life) is valued more than improvements to health (quantity of life).
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This paper develops a growth model with specialized goods where inefficient and corrupt bureaucracies interact with the provision of public investment services in affecting the productivity of private capital, specialization, and growth.... more
This paper develops a growth model with specialized goods where inefficient and corrupt bureaucracies interact with the provision of public investment services in affecting the productivity of private capital, specialization, and growth. The model provides potential explanations for the ...
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This paper examines the impact of adult mortality on the pattern of investment and economic development. In the presence of high mortality risks and imperfect an- nuities market, altruistic parents invest more in tangible assets (physical... more
This paper examines the impact of adult mortality on the pattern of investment and economic development. In the presence of high mortality risks and imperfect an- nuities market, altruistic parents invest more in tangible assets (physical capital, land) that are readily transferable to future generations compared to intangible human cap- ital. This differential effect of mortality can translate into divergent
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This paper develops a growth model with specialized goods where inefficient and corrupt bureaucracies interact with the provision of public investment services in affecting the productivity of private capital, specialization, and growth.... more
This paper develops a growth model with specialized goods where inefficient and corrupt bureaucracies interact with the provision of public investment services in affecting the productivity of private capital, specialization, and growth. The model provides potential explanations for the contradictory empirical results on the effects of public investment found in the literature as well as for the role of the
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We propose an economic theory of infectious disease transmission and rational behavior. Diseases are costly due to mortality (infected individuals can die prematurely) and morbidity (lower productivity and quality of life). Our model... more
We propose an economic theory of infectious disease transmission and rational behavior. Diseases are costly due to mortality (infected individuals can die prematurely) and morbidity (lower productivity and quality of life). Our model offers three main insights. First, a greater prevalence of diseases implies a lower savings-investment propensity because of mortality and morbidity. The extent to which preventive health investment