Pushan Dutt

Pushan Dutt's CV

Overview

• Research

• Gravity Models of Trade

• Political Economy of Trade Policies

• Trade and Labor

• Economic Development

• Stock Market Correlation

Institutions

My work focuses on three components of institutions, that are integral to the development of emerging markets.

1. Political instability

That political instability is detrimental for economic growth and investment is widely accepted. However, political instability is a catch-all for a host of factors including coups (successful and unsuccessful), revolutions, political assassinations, riots, protests and sometimes, even a measure of dictatorship. These discrete components have varying underlying causes and more importantly, different consequences for economic policies and outcomes. At the same time, not all coups and revolutions are equal - some lead to real changes in the political system while others leave the underlying political system unaffected. Sometimes there are also subtle and incremental changes in political rights and political competition, absent a coup or a popular revolution. My work constructs a new measure of political instability which captures fluctuations in the degree of democracy. It encapsulate movements from dictatorship to democracy and vice versa but not government changes that preserve the democratic or dictatorial structure of the country. It also picks up any incremental changes in political rights in a country over time. We show that such instability implies volatile polices. [paper]

2. Corruption

I have multiple papers in this domain. The first one shows that corruption interacts with formal trade barriers and has twin effects in terms of extortion and evasion. When trade barriers are low, corruption is extortionary and impedes trade. However, when trade barriers are low, corruption, by facilitating evasion of formal trade barriers can actually encourage trade. A second links interventionist trade policies to corruption. A third highlights the multiple equilibria nature of corruption, which renders the link between higher wages for bureaucrats tenuous - high wages may fail to discourage corruption. Recently, I have also been examining whether firms can learn to cope with corruption over time.

3. Democracy

Prior research has found that democratic institutions are not strongly related to economic growth - studies find frail positive, negative or no association between the two. In stark contrast, several researchers have documented a strong and robust link between democracy and growth volatility. While this observed empirical correlation between democracy and volatility is very strong, the theoretical counterpart to explain the mechanisms underlying the negative correlation is less well developed. I investigate policy choices in a world where the quality of available policy alternatives is uncertain. I show that the variance of the quality of chosen policies is decreasing in the extent of dispersion of decision-making authority. When an autocrat unilaterally choosing policies is replaced by a committee of policy-makers who vote over available alternatives, the larger number signals used in the latter decision process allows the committee to choose policies with greater precision and regularity. Lower policy volatility, in turn, implies lower output volatility. I document this link empirically as well. [paper]

Inequality and Poverty

I have examined the phenomenon of inequality from multiple angles. First, I show that while inequality increases political instability, the impact of inequality affects most significantly one component of political instability - the oscillation between democratic and autocratic regimes [paper1; paper 2]. In the context of trade policies, I show that politicians are responsive to inequality - they adopt more pro-labor policies when inequality increases [paper]. Another paper links globalization to the widening gap in wages between skilled and unskilled workers - as globalization triggers an increased threat of imitation, firms respond to that threat by biasing the direction of their innovations towards skilled labor-intensive technologies. This widens the wage gap between skilled and unskilled workers. My recent work shows that in developing economies, policymakers should focus more on poverty rather than overall inequality. This stands in stark contrast to the near universal focus in advanced economies on the top 1% share in income [paper].

A recent project extends my prior research on institutions and development by specifically looking at the role of financial institutions in economic development and poverty alleviation. In particular, we are interested in microfinance, an alternate that emerged to serve the poor and under-banked. We have been working closely with a microfinance organization with operations in Sri Lanka, Myanmar and Cambodia for the past year and a half. The first paper examine the differential impact of micro loans by loan purpose. While loans targeting income generation do in general exhibit better outcomes, these outcomes are at least as good for loans specifically funding traditional means of rural livelihood as for microenterprise loans. Within microenterprise loans, the outcomes are even worse for starting than growing microenterprises, pointing towards lack of complementary resources and skills as a bottleneck. These findings suggest a need to temper the emphasis on funding microenterprises as a preferred way of alleviating poverty [paper].

Crisis

I examine how consumers in emerging markets respond to a crisis. Following a crisis, in emerging markets, consumption expenditure by more than income and the decline persists longer. This implies greater weight given by consumers in these countries to the precautionary motive of saving, during a crisis. I also identify the categories and sub-categories that benefit from consumption smoothing in a crisis. [paper]

Program Direction

Executive Education Programs I Direct at INSEAD

Open Enrolment: Leading Business Transformation in Asia

Company Specific: McKinsey-INSEAD Business Basics Programme (2007, 2008); Firefly Program, Economic Development Board, Singapore; EDB-BMP Programme, Singapore; SKF

Teaching

MBA/EMBA courses I teach at INSEAD

Prices & Markets (MBA and EMBA)

This course provides the tools and concepts that are relevant to managerial decision making. We touch upon supply and demand; production and costs; pricing strategies; competition between industry participants; strategic decision-making and decision-making under uncertainty. Economic fundamentals, like demand, cost, market competition, and government policies, are critical to strategic decisions on issues relating to pricing, capacity management, new market entry, exit decisions, to name just a few. The microeconomic concepts and tools have many applications beyond those treated explicitly in the course; we see such applications, for example, in subsequent marketing, strategy, and finance courses. In fact, the primary objective of this course is to provide the basic tools that will be repeatedly applied in subsequent core and elective classes at INSEAD.

Some MBA Microeconomic tools that I have found entertaining.

Strategic Thinking With Game Theory (MBA and EMBA elective)

Game Theory offers a systematic approach to strategic decision making that helps in identifying the right alternatives and choosing among them. The biggest win comes from not just understanding the game you are playing and choosing the right strategies, but most importantly, from changing the rules of the game to your advantage. Given the uncertain, complex, and interconnected worlds that we all inhabit, game theory is a powerful tool that for making informed decisions. Game theory is also a language that facilitates deeper dialogue about strategy, and communicating your view of the world, and your rivals’ view of the world. The main objective of this course is to familiarize you with game-theoretic concepts and tools that are critical to formulating more robust business strategies and to becoming better strategic thinkers.

Economics and Management in Developing Countries (MBA)

“Economics and Management in Developing Countries” is intended to provide future managers, expecting to work in or with developing countries, with an understanding of their current economic reality and future prospects of these nations. The course concentrates on the relationship between corporate management and the economic and social development of poor countries. It does not cover in detail the internal operational challenges of corporations.

There are three parts to this course. Part A provides a general introduction to the problems of development, and the implications of the international economic and political order. Part B addresses the role that private business and markets can play in promoting economic growth, stressing the activities of foreign investors. Part C looks at the specificities of poverty and the role of the private sector in solving this problem.

Executive Education modules I teach at INSEAD

The World After the Covid Shock: The world is undergoing a crisis, unlike anything it has ever experienced. At its heart, we are experiencing a healthcare crisis with various parts of the world succumbing in a staggered fashion. The closest parallel was the Spanish Flu 100 years ago. Even this parallel is inexact as demographic shifts, the rise of globalization, urbanization, and larger, more densely populated cities can facilitate a virus’ spread across the globe in a few days and weeks. Countries around the world have chosen to put their economies into deep freeze temporarily. How long the economic impact lasts depends singularly on how long the pandemic lasts. This, in turn, depends on epidemiological variables and health policy choices such as the effectiveness of isolation and quarantine measures, herd immunity, development of rapid serological tests, discovery of a vaccine, surge in healthcare capacity, etc. Even when the pandemic ends, resumption of normalcy is likely to be gradual. Policymakers, especially central banks and fiscal authorities, have a crucial role to play. In this session, we will discuss the relative efficacy of various policy measures to counter the contraction effectively and promptly. More importantly, we shall identify economic variables that should be closely monitored to prevent this crisis from morphing into a debt crisis, or a financial crisis, or a currency crisis. Finally, we will discuss policies that can ensure a quick recovery once the pandemic ends.

Game Theory: I teach half and full day modules on Game Theory; I cover simultaneous and sequential form games and their applications to business and policy situations; Participants, in groups, play repeated games using an INSEAD game simulation that provides insights into dynamic strategies, trust, and cooperation. I have taught this in the Asian International Executive Programme, and to participants from Alstom and Economic Development Board. I also designed a half-day module relating Game Theory to the financial crises

Understanding the Global Economic Landscape: I setup a framework to analyze the macroeconomic landscape and its evolution over time. I use this framework to understand the growth prospects of the world economy, assess the experiences of countries like Japan and Singapore, the economic success stories, as well as that of growth disasters such as Chad and Niger. Participants apply this framework to understand the challenges and the opportunities offered by China, India, Vietnam, and other new “growth” centers. I have taught this to participants from Shell, Petronas, McKinsey, Alstom, IBM, Google, Adidas, EDB, SKF, Rio Tinto, ABN-Amro, Mubadala and Ernst & Young

The Rise of Inequality: Growth of average incomes does not tell us much about how the fruits of growth are or should be distributed. Today, inequality as an issue is attracting the most attention from business leaders, policy makers, politicians and voters. In this session, I define inequality and initiate a broad discussion on whether we should even care about inequality. I next take a data and event driven approach to understand when and how inequality matters. I close with thinking through the policy tools to tackle inequality and the responsibility of businesses in this domain. Issues spanning ethics, economics, politics, and business are covered.

Doing Business in Risky Countries: I analyze the risks and challenges of doing business in really risky countries such as Chad, Nigeria, Angola, to name a few. I touch upon the natural resource curse, the Dutch Disease, environmental sustainability, and corporate social responsibility. I use project finance to assess and mitigate the risks. I have taught this to participants from Shell, Petronas, Mubadala, Rio Tinto, McKinsey, and Ernst & Young as well as in the International Executive Programme

Singapore's Growth Challenges: Singapore has been one of the remarkable growth success stories. But what does the future hold for Singapore and what are the key challenges facing Singapore going forward? This session does a deep dive into the key challenges facing Singapore going forward and the strategies needed to successfully meet these challenges. I identify Singapore’s key competitive advantage and how it can be sustained in a rapidly transforming world, Topics I cover include innovation, productivity-driven growth, demographics, health-care costs, immigration, the future of work and inequality

Consumer Behavior in a Crisis: Here we try to understand how businesses will be impacted in a crisis (currency or banking crisis). To understand this requires a fundamental understanding of the impact of the crisis on the consumption decisions of the firm’s consumers. It is the consumers’ decisions on consumption that translate into demand for the firm and thereby determines how badly a crisis is likely to hurt the firm. I use consumption smoothing as a tool to analyze this issue. I also analyze which sectors in which countries are likely to recover the fastest. I use a Crisis Simulation Tool that I designed with Paddy Padmanabhan to convey the key learning points. Participants are provided with a series of macroeconomic forecasts and have to make pricing, production and inventory decisions in 2 countries (one developed and one developing) in the midst of a crisis. I have taught this to participants from Google, Toshiba, IBM, and Economic Development Board and in the International Marketing Programme, Asian International Executive Programme, and a program on the financial crisis.

Understanding the Great Contraction of 2008-2009: I teach a half day module on the latest financial crisis. I touch upon two broad issues: imabalances and incentives. I analyze the buildup in global imbalances and the perverse incentives in the financial and housing sectors to diagnose the great contraction. I also spend time on the crisis in the Eurozone, the debt dynamics in the US, and the short-term macroeconomic outlook in India and China. I have taught this in the International Executive Programme

FDI Policy: I teach a half day module for policymakers interested in attracting and retaining MNCs.

Corruption: I analyze the causes, consequences and challenges of corruption and how businesses should operate in corrupt environments. I have taught this in Asian International Executive Programme, Shell, Petronas, and Building the Business: Strategies for Asia-Pacific.

Microeconomics: I teach 1 and 2 day modules of core microeconomic tools. These include demand, supply and applications; market entry and exit decisions; using the industry supply curve to understand volatility; pricing strategies especially price discrimination; game theory. I have taught this to participants from McKinsey and COFRA

PhD courses I taught in the past

Microeconomics I

International Trade

Simulations/Reports

1. Consumer behavior in a crisis (with Paddy Padmanabhan)
2. Growth opportunities of countries (tailored report)

Case Studies

[Available from HBS Publishing or Case Centre]

The Rise of Inequality, INSEAD 2017.

The world is currently seeing a rise of populist leaders in both Europe and the US (Donald Trump), as well as in some emerging markets. Is this linked to the rise in inequality over time, whereby many of the gains have accrued to the richest 1%? This case sets up a discussion on why we should care about inequality. It explores the link between inequality and equality of opportunity, political instability, financial crises and economic growth. It closes by highlighting where businesses are truly a force for good and the circumstances in which a greater focus on distribution is warranted. The pedagogical objective is to facilitate an understanding of the interlinked issues of politics, economics, distribution and growth and the circumstances where business leaders must pay more attention to distributional aspects.

LOLC Micro Credit (with Jasjit Singh), INSEAD 2015.

LOLC Microcredit, a microfinance company within the LOLC group in Sri Lanka, has been serving the financial needs of the base of the pyramid through micro-leasing and group lending. The question now is whether to grow the exisiting business, use diversification to increase impact or prioritize its expansion into Myanmar. The case can be taught either as a microfinance case or as a strategy case.

The Elasticity of Demand for Gasoline, INSEAD 2015.

This exercise uses monthly data for the US from 1978-2013 to estimate a demand function for gasoline in the US. The demand function is used to calculate the price and income elasticity of demand, both in the short and the long run. The case can be used to teach the concept of elasticity by making students estimate elasticity of demand using data and regression analyses. Students use the data and built-in regression functions in Excel. Next, they estimate short and long-run elasticities to see that demand is much more price-inelastic in the short run. Instructors can build on these concepts to explain why oil prices tend to be so volatile in the short run.The exercise is useful for both MBA students and for students in an intermediate Microeconomics course. Included are a set of Powerpoint files to run the entire session/class and data for the gasoline exercise. Please see here.

Contact

Pushan Dutt

INSEAD Asia Campus
1 Ayer Rajah Avenue
Singapore, 138676
Tel: +65 6799 5498
Fax: +65 6799 5499
Email: [email protected]