Saturday, January 20, 2018

Weekend reading links

1. Development of sub-centres as "wellness centres" and promotion of Ayush are two priorities of the government. But data on patient preference of different health facilities from NFHS 4 shows that this may be one hell of a challenge. The sub-centre is used by just 1.5% and 3.1% of the rural and urban populations respectively. About 1% of people use Ayush facilities. It is to be noted that only 42% in urban areas and 46% in rural areas opt for government health services. 

Another striking graphic is below about the reasons for not visiting public facilities.
Note that absenteeism is among the least of problems. Even when doctors are available, people prefer to skip public hospitals for reasons like poor quality of care.

2. Justin Sandefur uses data from the new and richer dataset of the World Inequality Report to show that the famous Elephant graph of incomes gains to world population percentiles over the past twenty years constructed by Branko Milanovic and Christoph Lakner may have to be replaced by a Loch Ness Monster graph. See the original Milanovic et al graph...
And Sandefur's Loch Ness Monster graph for the same period by using WIR data
The WIR graph for 1980-2016 looks like this
The takeaway is that incomes gains have been much smaller than expected even among those benefiting from the rise of China and India whereas that accruing to those at the top of the income ladder much higher. In simple terms inequality has worsened even more than we had thought.

3. Richard Thaler's Nobel Lecture slides here.

4. Uday Kotak makes a less discussed point about foreign ownership of Indian companies,
In 1982 when I started my career, HDFC Ltd’s total market capitalization was Rs 500 crore and foreign ownership was zero. Today that Rs 500 crore has become Rs 275,000 crore. More than 80 per cent is foreign owned. Here’s a company whose core business is money from retail savers – Indian house owners. And of the entire gain made by that company, 80 per cent belongs to foreign investors... Four out of five Indian private banks have majority foreign ownership. Only one with Indian majority is us (Kotak Mahindra Bank)... Let me give the comparison of America and China. The biggest growth companies in the US are Amazon, Facebook, Google, Microsoft and Apple. Go and check out. The majority of these companies are American owned. American savers benefited by them. In China, Alibaba, Tencents and Baidu. What’s the majority holding?
He makes the point about India's relative aversion to foreign debt as against foreign equity. This one deserves a longer post. 

5. Gautum Bhatia has a good article on why the Chief Justice of India's power to allocate cases is a matter of concern.
First, the Supreme Court now consists of 26 judges, who predominantly sit in benches of two. Compare this with the US Supreme Court, for example, where all its nine judges sit together (en banc) to hear cases, or the UK’s Supreme Court, where 12 judges often sit in panels of five (or more). The Chief Justice of the US Supreme Court, therefore, has no choice in the question of which judges will hear a case, and in the UK, the choice is significantly constrained. By comparison, the Chief Justice of India has significantly more discretion in determining which judges will hear and decide a case... 
The rise of public interest litigation has diluted the practice of strict adherence to the legal text, and the Court’s habit of sitting in multiple small benches has undermined the gravitational pull of precedents. This means that when a judge surveys the legal landscape before her, she finds that it gives her greater room to effectuate a personal interpretive philosophy than she might otherwise have. Multiple examples can be cited to demonstrate this. Perhaps the starkest is a brief period in the mid-2000s, where two Supreme Court benches were hearing cases involving the death penalty. One of these benches confirmed virtually every death sentence, while the other commuted most of the cases before it. The question of whether a person lived or died, then, depended upon the lottery of which bench his case came before or — in the Indian legal system — which bench the chief justice assigned it to.
And third, the Supreme Court is dealing with a massive backlog of cases. This means that “in the normal course of things”, a petition will take many years to be heard and decided. The chief justice, however, has the power to “list” cases for hearing. Given the huge backlog, this simple administrative function becomes a source of significant power... Backlog, therefore, allows the Court, through the office of the chief justice, to engage in the practice of judicial evasion — that is, effectively deciding a time-sensitive case in favour of one party by simply not hearing it. In a legal system where a significant percentage of the judges of the Court sit on every case, where there is at least a surface consensus about the interpretive philosophy that judges use to decide cases, and where all cases are heard within a short time of being filed, the chief justice’s power as “Master of the Roster” would be purely administrative. However, in our system, where none of these three conditions obtain, this harmless administrative power has transformed itself into a significant ability to influence the outcomes of cases.
6. More on the puzzle that global equity markets have become,
In all of 2017, the Standard & Poor’s 500-stock index experienced no decline greater than 3 percent, the first time that had happened. And a widely followed volatility index known as the VIX closed below 10 on more than 40 days in a six-month period through late November, according to Citi Research. Before that, the VIX had not closed below 10 on more than six days in any six-month period.
7. The decision by India's securities regulator, SEBI, to ban Price Waterhouse, the auditing arm of PwC, from auditing listed firms in India for two years for its complicity in manipulating accounts in the Satyam scandal may sound harsh but is a very welcome decision.

We have seen too many examples of these large institutional service providers escape with slight rap on their knuckles for even very grave misdemeanours. The expectations need to be realigned. It is therefore appropriate that the regulator took the harsh step.

8. Is Amazon under-paying its workers compared to industry standards? The Economist writes,
According to available data from the Bureau of Labour Statistics (BLS), warehouse workers in counties where Amazon operates a fulfilment centre earn about $41,000 per year, compared with $45,000 per year in the rest of the country, a difference of nearly 10% (see chart 2). The BLS data also show that in the ten quarters before the opening of a new Amazon centre, local warehouse wages increase by an average of 8%. In the ten quarters after its arrival, they fall by 3%.
And adding more evidence to the growing body of reasons supporting exercise of monopoly power by large corporates,
An NBER working paper by José Azar of the IESE business school, Ioana Marinescu of the University of Pennsylvania and Marshall Steinbaum of the Roosevelt Institute finds that a relatively small number of employers account for a large share of job opportunities in many American communities. In places where such labour-market concentration is highest, wages tend to be lower. These findings suggest that if Amazon is the only major employer in the cities and towns where it operates, the company can offer wages that are well below those of its competitors.
How much more evidence will be necessary before the likes of folks at Marginal Revolution accept the reality of business concentration and its damaging social and political consequences?

9. The competition-gone-crazy (or beggar-thy-competitor) story that is India's telecom market,
Reliance Jio’s entry in 2016, with never-before tariffs, has led to a calamitous fight for dominance over the last 18 months. It dragged down Airtel’s profit by a staggering 90% in the June-September 2017 quarter while Idea swung to a loss of over Rs 1,100 crore, 11 times worse than a year earlier. British telecom major Vodafone had to write down the value of its India business by a mind-boggling 5 billion euros, even as it worked a merger with Idea to take on its competitors.

“You have built a market that expects you to give 35 GB of data for a monthly price of Rs 400 [$6.25] per month. How will you make money?,” Kapoor said. “In the US today, you won’t get more than 3-4 GB data for $100 a month. Wireless networks are not built to give you 35 GB of data a month”.
10. Finally, this may be a simplification, but the coincidence between convergence of income shares of the top 0.1% and bottom 90% in the US and the rise of populism is striking,

1 comment:

Abhinav Mehrotra said...

The point that Uday Kotak made about India funding its deficit through equity. I feel the recent announcement of the government mulling over 100% FDI in banking is motivated by an upcoming planned deficit in the budget due to a pre-election year.

I also feel that the USA is funding some of its deficits through real estate sale to foreigners, especially the Chinese.

Any thoughts on this?