How to resolve the bad loans choking the banking system is perhaps the biggest problem the Indian economy is battling at this juncture. A new paper by Patrizia Baudino and Hyuncheol Yun from the Financial Stability Institute of the Bank for International Settlements examines major instances of bad loan resolution from the 1980 onwards across the world and finds that the best solutions are ones that are designed to meet specific country needs. Factors that affect resolution policies include but are not limited to the macroeconomic situation, structural banking sector limitations, nature of assets underlying non-performing loans, the ability of the state to provide a fiscal buffer as well as the legal and judicial infrastructure. Legal frameworks that entail lighter court involvement can enable fast resolution. For instance, it took General Motors and Chrysler less than two months to enter and exit bankruptcy in 2010.

Also Read: Resolution of non- performing loans – policy options

In 2004, the US cut the number of new H1-B visas from 195,000 to 65,000. Did the move help in generating jobs for the American workers? A National Bureau of Economic Research (NBER) paper by Anna Maria Mayada, an associate professor of economics at Georgetown University, and others argues that this might not have been the case due to low substitutibility between domestic and H1-B workers. The move also had unintended consequences. Because a large number of H1-B visa losing workers are highly qualified workers, driving them away can negatively affect future productivity gains. The 2004 restrictions ended up helping sections such as Indian information technology (IT) workers among the H1-B aspirants. This happened because an increase in competition for these visas increases the importance of economies of scale in hiring workers and labour market networks, where the Indian IT industry had an edge.

Also Read: The Effect of the H-1B Quota on Employment and Selection of Foreign-Born Labor

Voters can behave in two ways during elections. Sincere voting implies voting for the candidate with the highest individual preference. Ethical voting entails abiding by a group’s decision with the assumption that this would generate a larger payoff than acting individually. A National Bureau of Economic Research working paper by Laurent Bouton of Georgetown University and Benjamin G. Ogden from Texas A&M University argues that sincere voting is more likely under a majority runoff rule rather than plurality rule. Majority runoff rule involves up to two rounds of elections, in which a candidate must secure a majority of the votes in order to get elected. Plurality rule is the first-past-the-post system, where the candidate with the maximum votes is declared elected.

Also Read: Ethical Voting in Multicandidate Elections

Fiscal space has decreased in emerging market and developing economies after the 2008 financial crisis, according to a new World Bank policy research working paper by M. Ayhan Kose and co-authors. The authors have built a database of fiscal space in 200 countries between 1990 and 2016, examining 28 indicators grouped across four categories: debt sustainability, balance sheet vulnerability, external and private sector debt-related risks, and market access. Using the data, the authors find that fiscal crises had a tendency of coinciding with a worsening of several indicators of fiscal space, particularly fiscal debt sustainability. Though fiscal space improved during 2000-07 from the 1990s, it deteriorated across the world after the 2008 financial crisis. However, advanced economies have made a better recovery with most indicators of government debt sustainability returning to mid-2000 levels.

Also Read: A Cross-Country Database of Fiscal Space

Richard Thaler has been awarded the Nobel Prize in Economics for his pioneering role in development of behavioural economics. Francesca Gino, a professor at Harvard Business School, says that the insights of behavioural economics are already being put to use by a lot of governments and corporations. General Electric conducted a randomized control trial to check whether giving monetary rewards for quitting smoking would change the behaviour of its employees. Those being offered monetary benefits were three times more likely to quit smoking and the benefits persisted even after the monetary reward was withdrawn later. Restaurants in China have been offering people the option of downsizing their meals. Up to one-third of them ate 200 calories less on average. However, Gino cautions that in situations where the objectives of those giving and receiving nudges differ, outcomes of using behavioural economics-based tools need not be mutually beneficial.

Also Read: The Rise of Behavioral Economics and Its Influence on Organizations

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