Studies in Microeconomics

While empirical and conceptual studies highlight the interdependence of hospitals and allied firms in medical-tourism destinations, few offer theoretical models capturing this dimension. This study develops a model featuring two interdependent sectors: hospitals providing medical care and allied-firms offering complementary services (e.g., accommodation, food, transport) that support the stay of patients and their companions in the destination. We examine two market structures: a monopoly hospital providing homogeneous service quality and a vertically differentiated duopoly comprising high-quality and low-quality hospitals. Each structure is analyzed under two institutional settings: non-coordination, where hospitals independently set service-quality to maximize their own profits; and coordination, where a central planning-authority chooses quality levels to maximize joint sectoral profit. Results show a trade-off—coordination improves accessibility and allied-sector profits through lower medical service quality and prices, while non-coordination yields higher medical-service quality and greater profits for the hospital-sector but reduces demand and profitability of the allied-sector. Sensitivity analysis suggests that widening income-dispersion improves medical service-quality under monopoly, but may lower the quality levels under duopoly if the high-end hospital’s initial quality is sufficiently high.

JEL Classifications: D42, D43, L83, Z320

The current research applies a multi-stage approach for measuring and explaining the efficiency performance of 20 general insurers operating in India for the phase 2012–2013 to 2019–2020. In the first stage, the study adopts non-parametric radial data envelopment analysis (DEA) for point and interval estimation of firm-specific efficiency, scale efficiency, returns to scale (RTS) and scale elasticity. The second stage of the study applies panel data regression for regressing technical and scale efficiency scores on the index of market concentration, insurer age, return on shareholders’ capital and the solvency indicator. The outcome of the next stage indicates that the index of market concentration and insurer age are the two contextual variables which are statistically significant, although their impacts on technical and scale efficiency are negative. The influence of the solvency ratio is significant for scale efficiency only.

JEL Classifications: C-23, C-61, D-22, G-22

It is crucial to understand how environmentally friendly investments are interrelated with commodity futures. This study examines the quantile connectedness among global environmental, social and governance (ESG) stocks and commodities using the quantile vector autoregression (QVAR) approach on data spanning from May 2017 to April 2024. The findings exhibit higher return spillover in lower and upper quantiles and less spillover in the median quantile. Furthermore, during the COVID-19 pandemic and the Russia–Ukraine war, connectedness has increased among ESG stocks and commodities in all market conditions. Further analysis indicates that Europe ESG leaders (EU_ESG) and USA ESG leaders (US_ESG) serve as diversifiers in all market scenarios, but world ESG leaders (WL_ESG) act as a diversifier just in the natural market. Emerging markets ESG leaders (EM_ESG) generally function as a risk absorber and, in calm times, act as a hedge against developed ESG shocks. Finally, gold functions as a safe haven in crises for environmentally friendly investments. Our findings provide valuable information to investors, policymakers and portfolio managers regarding portfolio diversification.

JEL Classifications: O16, C58, C61, G41

This study examines how financialization affects the investment behaviour of firms in Türkiye’s cement industry, a capital-intensive sector that is crucial for construction, infrastructure and industrial development. The analysis uses firm-level panel data for 10 publicly listed cement companies over the period 2008–2016. This time frame is chosen because consistent data on interest payments and financial items are available from 2008 onwards, while major mergers in 2017 significantly reduced firm-level data continuity thereafter. To capture both real and financial dimensions of investment, the study incorporates non-financial determinants (investment rate, capacity utilization and operating profit) alongside financial indicators (financial profit rate, borrowing cost, financial asset ratio and debt ratio). The investment rate is measured as capital expenditures relative to capital stock, while utilization is proxied by sales over capital stock. Given the dynamic nature of investment and potential endogeneity, the difference generalized method of moments estimator is employed to control for firm-specific effects, persistence and reverse causality. The results show strong investment persistence and a significant accelerator effect of capacity utilization. While operating profit is insignificant, financial profit and financial asset holdings positively affect investment, suggesting that financial income and liquidity buffers can support real investment. Debt has a negative but insignificant effect. Overall, the findings indicate that financialization exerts dual effects—reshaping firms’ financial strategies while also providing liquidity that can facilitate productive investment in an emerging market context.

JEL Classifications: G32, L61, E22

This paper extends the literature on spatial price–quality competition by looking into the welfare impact of increased consumer heterogeneity. This is done by incorporating consumer heterogeneity into a model where firms compete simultaneously in price and quality within a circular market framework. Consumers are assumed to have either high or low willingness to pay for quality, thereby capturing both vertical and horizontal product differentiation in the model. The analysis establishes that as consumer heterogeneity increases, welfare for low-preference consumers follows an inverted-U pattern. Initially, greater heterogeneity enhances welfare by inducing firms to offer higher-quality products at higher prices. However, beyond a threshold, rising production costs and hence, price increases outweigh these benefits, leading to reduced welfare and access to the market for consumers with a low preference for quality. This finding highlights a crucial trade-off between quality improvement and affordability, and hence, in market access. This offers an important insight into framing policies that aim to promote inclusive market access and maintain balanced quality competition.

JEL Classifications: D21, D62, I31, D49

The impact of employee turnover on firm performance is well established in the human resource literature. However, the extent to which employee turnover affects the administrative costs of microfinance institutions (MFIs) has not yet been thoroughly investigated. This investigation is critical because microfinance is often characterized as a ‘high-touch, low-tech’ sector, heavily reliant on staff for client service. This study utilized data from 1,122 unique MFIs in 107 countries over nearly a decade (2010–2018). The data were analyzed using a random-effects model and a two-step system generalized method of moments to ensure the robustness of the findings. Our findings reveal an inverted U-shaped relationship. Specifically, employee turnover initially increases MFI administrative costs, but these costs begin to decline after reaching a peak. Moreover, changes in staff productivity explain this non-linear relationship.

JEL Classifications: G21, J63, N20, O15

An empirical investigation has been conducted in the present study to observe the climate-economy interactions of Indian states and Union Territories from various dimensions over the period from January 2010 to December 2023. Thus, monthly average precipitation and temperature have been taken into consideration as climate variables, and the average gross state domestic product (GSDP) as the economic variable. For empirical inference, multiple regression equations and panel regression equations have been developed and estimated. Precipitation has a significant positive impact on average regional GSDP, whereas the North-East region has shown a significant negative temperature shock. Moreover, the seasonal precipitation shock has a stronger effect on the regional average GSDP compared to temperature. Additionally, panel estimation has revealed that both temperature and precipitation have a significant adverse effect on average seasonal GSDP.

JEL Classifications: Q54, Q56, Q58, C21

Investment decisions in financial markets are fundamentally guided by rational choice frameworks, where both individual investors and institutional fund managers act under the influence of market signals, risk perception and expected utility. Mutual funds, as a prominent investment vehicle for retail and institutional investors, serve as intermediaries between consumer choice and producer (fund managers) strategy. In an era marked by heightened market volatility and information asymmetry, investment decisions are increasingly shaped by rational expectations and behavioural responses to market signals. This study investigates the co-movement dynamics between mutual fund returns and their corresponding underlying indices of the National Stock Exchange (NSE) of India, emphasizing how such relationships influence the rational choices of both individual investors (consumers) and fund managers (producers of investment portfolios). Utilizing advanced time-series econometric techniques, including the cointegration test, vector error correction model (VECM) and Granger causality analysis, the study evaluates whether mutual funds align with the indexes of NSE in a manner that reflects market efficiency and rational fund allocation. The findings reveal significant short-run and long-run dependencies, suggesting that fund managers’ strategic decisions are closely tethered to index movements, which in turn affect investor confidence and choice under uncertainty. This research contributes to the broader discourse on decision-making under risk by highlighting how the perceived stability and predictability of benchmark indices guide mutual fund flows. It also raises critical questions about whether such co-movements indicate informed investment choice or passive index mimicry, thereby offering new insights into consumer investment behaviour in India’s mutual fund ecosystem. The study underscores the implications for rational asset allocation, portfolio diversification and the role of informational efficiency in financial decision-making.

JEL Classifications: D72, D74, H1, H4, H7

This exploratory scope study examines research conducted in the domain of family-owned manufacturing businesses in India, particularly small and medium-sized enterprises (SMEs), which constitute more than 80% of the country’s business entities. Due to diverse constraints, SMEs face challenges and have opportunities that are not harnessed. Therefore, this study extracts the literature on SMEs and analyze it in terms of methodology, topics, publications and findings, aiming to develop an analyzed snapshot of the domain’s current state through a synthesized research corpus. The study’s objective is to identify gaps in the research repository due to both identified and unidentified limitations. Through the rigorous approach, our study’s outcome informs the agenda for future research and its rationale. As an exploratory study, this paper provides a snapshot for scholars to direct their studies to areas that are important to the domain and have been neglected, leaving not one but several gaps and directions. The key findings highlight the opportunities, such as working in trust-based networks, learning across generations to handle business, the use of resources and networks to have enough resilience during a crisis, and transitioning to green manufacturing practices despite having constraints. In terms of challenges, family-owned businesses often struggle with financial and governance risks. It is also observed that no SME-specific quality models are present in the literature. Resistance to innovation, managing family business interrelations and the choice between cost and sustainability are also found among common dilemmas. The outcome of this analysis offers clue for academics, policymakers and professionals working in family-owned businesses and SMEs in developing countries.

JEL Classifications: D13, L25, L26, G32

This study evaluates the effectiveness of informal user fees in enhancing community development in the Southwest region of Nigeria using a structural equation modelling (SEM) approach on a sample of 12,377 residents across 48 local government areas in the 6 states of the region. Its findings suggest that informal contributions are positive predictors of community development projects in security, sanitation, human capital development and infrastructure maintenance. Efforts of the residents highlight the critical role of grassroots organizations in local development. Enhancing the effectiveness of these efforts requires state governments to implement a unified policy that harmonizes informal tax systems and governance practices.

JEL Classifications: H71, O12, R58, R51

In the measurement of multidimensional deprivation, dimensions of deprivation are often weighted by people using either their own implicit value judgements or data-based statistical methods. Each of these methods has limitations. The weights based on implicit value judgements leave no scope for any reason-based public scrutiny so that, over time, a consensus may develop over a set of value judgements on which the weighting of dimensions ought to be based. The data-based statistical methods also seem to be inadequate as they ignore the distinction between ‘is’ and ‘ought’, whereby what ‘ought’ to be cannot be derived from what ‘is’. In this paper, we argue for an approach to determining the weights of the dimensions of deprivation based on normative judgements. We adopt clearly spelt-out, norm-based weighting. The dimensions of deprivation in our analysis are categorized into basic and non-basic dimensions based on human rights and the hierarchy of needs theory. The basic dimensions of deprivation are given more weight than the non-basic dimensions of deprivation. We construct a class of norm-sensitive deprivation indices based on Jayaraj and Subramanian (2010) index that falls in the similar axiomatized group of indices of Chakravarty and D’Ambrosio (2006). We provide some applications of these indices using India’s National Family Health Surveys. We observe certain significant changes in the deprivation ranking of the Indian states as compared to the other methods followed in the literature.

JEL Classifications: D63, I31, I32

Although many studies have explored the role of information and communication technology (ICT) in boosting productivity, there is limited evidence on how ICT investment impacts total factor productivity growth (TFPG) differently across different technically-intensive firms. This study addresses this gap by examining the effect of ICT investment on TFPG using firm-level data of the Indian manufacturing sector. The findings indicate that ICT investment has a significant, positive effect on TFPG overall, with a notably significant impact in high-tech and medium-tech manufacturing firms. However, the benefits of ICT investment are not pronounced in low-tech firms, suggesting that these firms may lack the infrastructure or digital bottlenecks. From a policy perspective, it is crucial for the government to support low-tech manufacturing firms in upgrading their technical capabilities, enabling them to compete more effectively and improve TFPG in the context of Industry 4.0.

JEL Classifications: O33, D24, C36, C23, L60

The paper endeavours to assess the export competitiveness of the textiles sector of India. This is followed by an inter-regional comparison of the comparative advantage of the handloom sector. At the end, the major macro-level determinants of the comparative advantage are identified. Analysis reveals export competitiveness of textile products from India. The results of inter-regional comparison of export competitiveness among five different regions of the country indicate comparative advantage in the case of the North Indian and North East Indian regions of India. A negative correlation is identified between per capita state GDP, gross capital formation, number of factories with export competitiveness as measured by RSCA. This paves the way for further research to explore the impact of the relevant macroeconomic factors on export competitiveness which is so far unexplored in the context of handloom sector.

JEL Classifications: F14, L67, F1, Q1

The ecological footprint (EFP) is an important measure reflecting the interaction between humans and the environment. It provides the requirements to absorb the waste and emissions generated by humans in terms of pressure on natural resources. Therefore, an accurate prediction of EFP is vital to develop an understanding of sustainable development, the ecosystem, environmental protection, and resource utilization, especially in India, which has one of the highest total ecological deficits. This study applies various machine learning (ML) models to predict EFP in India based on 11 potential predictors covering trade openness (TO), urban population (UP) and renewable and fossil-fuel energy consumption over the period 1980–2017. The results show that the Random Forest (RF) model generates the lowest errors for prediction among the considered models and that five variables, namely inflation, renewable energy consumption (REC), role of primary sector in the economy, UP and human capital (HC), are the most crucial predictors of EFP.

JEL Classifications: C19, D70, P18, Q59

The Indian hotel and restaurant (H&R) industry is up against fierce competition from large hotels and the rapidly expanding online market, particularly in the aftermath of the epidemic. This research employs data envelopment analysis (DEA) to evaluate the impact of COVID-19 on relative efficiency of 265 H&R firms in India. The analysis reveals substantial operational and scale efficiency (SE) discrepancies, underlines exemplary enterprises that could serve as benchmarks for underperforming firms, and offers a discerning evaluation of operational and strategic management modifications. Moreover, underscored by slack analysis are significant inefficiencies in resource usage, which are aggravated by increasing competition from overseas hotel brands and online food delivery firms. The study recommends that H&Rs optimize workforce management, review staffing needs and apply takeout services to increase efficiency. The analysis of slack indicates considerable inefficiencies in capital allocation, asset management and operational cost regulation. The findings offer strategic insights for management strategies, emphasizing the need for scale optimization, workforce rationalization and technology integration. Furthermore, by implementing strategic interventions, the government can play a significant role in industry revival, efficiency enhancement and long-term sustainability in a highly competitive market.

JEL Classification: B21, C61, D24

Research papers on female labour force participation (FLFP) are neither rare nor uncommon. However, papers measuring unpaid female labour are not many. This paper estimates the increase in gross domestic product (GDP) due to an increase in FLFP using two rounds of data from the Periodic Labour Force Survey (PLFS) of India. To show the effect of including female workers who are out of the labour force on the national income of the country, I adopt the method of imputing incomes for women not in employment, accounting for two scenarios: (a) without work and without a child and (b) without work and with a child. The estimates from our sample suggest an increase of 31% in total income earned if women who are out of the labour force are employed gainfully. Moreover, increasing participation of women aged 36–55 could make a substantial contribution towards reducing the gap between per capita income of India at present and the target it has set to achieve.

JEL Classifications: J01, J21, J22, J12

In network games under a cooperative framework, the position value is a link-based allocation rule. It is obtained from the Shapley value of an associated cooperative game where the links in the network are considered players. The Shapley value of each of the links is then divided equally among the players who form those links. The inherent assumption is that the value is indifferent to the weights of the players in the network. Depending on how central a player is in the network or their ability to form links with other players, etc., players can be considered to have weights. Thus, in such situations, dividing the Shapley value equally among the players can be an overly simplistic notion. We propose a generalized version of the position value, that is, the weighted position value, that allocates the Shapley shares proportionally to the players’ weights. These weights for the players are exogenously given. We provide two axiomatic characterizations of our value. Finally, a bidding mechanism is formulated to show that any subgame-perfect Nash equilibrium (SPNE) of this mechanism coincides with the weighted position value.

JEL Classifications: C71, C79

In the era of social media and internet, Twitter (presently ‘X’) has been recognized as the prominent factor for financial markets by multiple corporates and experts. The motivation of present research hinges on burgeoning popularity of Twitter in the financial community for sharing information and impact of their hidden sentiments on financial markets. Research on tweet-based sentiments and their influence on financial markets in India is still in the infancy stage. To cover this gap, the present study empirically investigates the predictive impact of financial tweet sentiments on the Indian stock Index’s returns over a short period. The paper scraped 22,816 tweets and Nifty 50 index’s intraday hour end values for January 2023. Using Natural Processing Technique, the overall sentiments of the financial community are found as highly positive for each trading hour. Next, it presents a low positive correlation between positive sentiments, sentiment polarity, and hourly returns. Lagged negative sentiments reflect the better ability to impact current period returns than positive sentiments and polarity. Additionally, sentiment polarity and returns reflect bi-directional causation for the future period impact. Investors, stock market traders, and other practitioners can employ the proven concept of linkage between tweet sentiments and returns for constructing effective investment and trading strategies.

JEL Classifications: G41, D53, G17, G02, G19

Global disruptions, such as health crises and geopolitical tensions, significantly impact both climate and commodity dynamics. This study, well-grounded on environmental finance theory, input–output modelling, socio-transition philosophy and behavioural finance perspectives, explores the evolving interactions between carbon emissions (CE) and metal markets during COVID-19 pandemic and Russia–Ukraine war (RUW). The study uses time-varying parameter vector autoregressive model (TVP-VAR) technique to evaluate time and frequency varying connectedness between CE and metal markets from 3 January 2020 to 28 June 2024. During the COVID-19 pandemic, initial connectedness among selected markets peaked at 85%, averaging 46%, highlighting a significant CE–metal nexus that necessitates strategic responses. In the RUW period, connectedness averaged 47.82%. CE influence metal markets primarily in the short term. Wavelet coherence analysis reveals that palladium and platinum are highly sensitive to CE over the long term, while gold and silver may serve as effective diversifiers and hedges against carbon-related risks in metal investments. The study is relevant for investors in the metal sector with environmental considerations.

JEL Classifications: G110, Q430, L720