Potentials of Village and Small Enterprise Sector in the North Eastern Region of India

- -S K Mishra

The Village and Small Enterprise (VSE) sector not only has tremendous potential of development in the North Eastern Region (NER) of India, but also suits most to this region's natural endowment, human resources and sociological conditions. This sector also provides a great scope for women empowerment and thus reduction in gender-based inequalities in the society. This paper examines the prospects and constraints of development of the VSE sector in the NER with special reference to social, technological and infrastructural aspects.

© 2008 IUP . All Rights Reserved.

R&D and the Persistence of Profits

- - Johan E Eklund and Daniel Wiberg

Economic theory tells us that abnormal firm and industry profits will not persist for any significant length of time. Any firm or industry making profits in excess of the normal rate of return, will attract entrants and this competitive process will erode their profits. However, a substantial amount of research has found evidence of persistent profits above the norm. Barriers to entry and exit, is an explanation often put forward to this anomaly. In the absence of, or with low barriers to entry and exit, this reasoning provides little help in explaining why these above-norm profits arise and persist. This paper explores the links between the systematic search for knowledge and the persistence of profits. By investing in R&D (Research and Development) firms may succeed in creating products or services that are preferred by the market and/or find a more cost efficient method of production. Corporations that systematically invest in R&D may, by doing this, offset the erosion of profits and thereby have persistently high profits, which diverge from the competitive return. The paper argues that even in the absence of significant barriers to entry and exit, profits may persist. This can be accredited to a systematic search for knowledge through R&D.

© 2008 IUP . All Rights Reserved.

On R&D Investment

- -Massoud Khazabi

The paper presents a theoretical model of R&D (Research and Development) investment and extensively studies the expensing policy of the development-related costs. Basing itself on an analytical discussion as well as a study of the optimal rate of expensing, the paper shows that a firm's R&D investment policy and expensing-related costs are influenced by a set of variables; inter alia the stock market effects and corporate income tax rates. Interest rates, tax rates, marginal production costs, stock market indices and the speed of development benefits' revelation, would also alter the firm's disclosure and innovation policies conspicuously.

© 2008 IUP . All Rights Reserved.

An Econometric Analysis of Personal Consumption Expenditure in Ethiopia

- -Ch. Paramaiah and Oman Amulu Akway

This paper examines the determinants of personal consumption expenditure in Ethiopia by incorporating other variables, in the consumption expenditure function based on both the traditional Keynesian absolute income and permanent income hypotheses. The analysis begins with the determination of the non-stationarity and stationarity of the variables to be included in the two alternative specifications of the personal consumption expenditure function. Using augmented Dickey-Fuller and Phillips-Perron tests, all the variables were found to be integrated of order one. In order to make them stationary, the variables were differenced once, and an advanced time series econometric technique was applied to avoid spurious regression associated with the time series data. The Engle-Granger two-step procedure was used to test cointegration among the variables. According to this test, all the variables in both Keynesian absolute income hypothesis and permanent income hypothesis specifications were found to be cointegrated. The error correction models were estimated to take into account the short-run dynamics in the relationships among the variables in the two specifications. In Ethiopia, real disposal income and inflation were found to explain personal consumption expenditure pertaining to the Keynesian absolute income hypothesis, whereas permanent income, inflation and real tax revenue were found to be economically and statistically significant in the permanent income hypothesis specification.

© 2008 IUP . All Rights Reserved.