Economic Development, Urban Underemployment, and Income Inequality
AbstractThe evolution of income inequality during the course of economic development is investigated. The source of inequality is market luck in obtaining employment in the protected urban 'formal sector'versus employment in the unprotected urban 'informal sector.' It is shown that with development, inequality tends to follow an 'inverted U.'It rises when urbanization is low and consequent pressure on the land keeps rural incomes low, making agents willing to incur high risks of 'underemployment'in the urban informal sector. It eventually falls after urbanization and consequently rural incomes have increased sufficiently to allow agents to make better than even bets in the urban-industrial sector.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 26 (1993)
Issue (Month): 4 (November)
Contact details of provider:
Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
Web page: http://economics.ca/cje/
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Other versions of this item:
- James E. Rauch, 1991. "Economic Development, Urban Underemployment, and Income Inequality," NBER Working Papers 3758, National Bureau of Economic Research, Inc.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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