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A Model of the Informal Sector in Development

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Author Info

  • Ira N. Gang
  • Shubhashis Gangopadhyay

Abstract

In discussions of economic development, industrial dualism is often ignored. Industry, or the modern sector, in developing countries is composed of an overregulated formal sector and a free-entry informal sector. Because of the nature of the regulations we can, in general, identify the formal sector with large industry and the informal sector with small industry. The informal modern sector is often a dynamic actor in the process of economic development, frequently outpacing the growth of the formal modern sector. We investigate in a general equilibrium model the conditions under which the informal sector increases its capital stock more rapidly than the formal sector. We also look at the employment-unemployment effects of industrial dualism.

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 17 (1990)
Issue (Month): 5 (December)
Pages: 19-31

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Handle: RePEc:eme:jespps:v:17:y:1990:i:5:pp:19-31

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Related research

Keywords: Economic growth; Industry; Unemployment;

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Cited by:
  1. Suguta Marjit & Saibal Kar, 2007. "The Urban Informal Sector and Poverty: Effects of Trade Reform and Capital Mobility in India," Working Papers MPIA 2007-09, PEP-MPIA.
  2. Saracoglu, Durdane Sirin, 2003. "On The Size And The Evolution Of The Informal Sector In Developing Countries: The Case Of Turkey," 2003 Annual meeting, July 27-30, Montreal, Canada 22211, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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