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Optimal Policies in a Dual Economy with Open Unemployment and Surplus Labour

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  • Gang, Ira N
  • Gangopadhyay, Shubhashis

Abstract

This paper considers a dual economy in which the urban sector has open unemployment while the rural sector has surplus labor. The model is a n extension of the Harris-Todaro (1970) framework as developed by Kul B. Bhatia (1979), where full employment is said to exist when open u nemployment and surplus labor are eliminated. The authors characteriz e this full employment equilibrium and the conditions for technical e fficiency and, in addition, show the existence of a unique pair of op timal wage subsidies to each sector. Unlike the earlier uniform wage subsidies, they show that an optimal subsidy is not uniform across se ctors. Copyright 1987 by Royal Economic Society.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 39 (1987)
Issue (Month): 2 (June)
Pages: 378-87

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Handle: RePEc:oup:oxecpp:v:39:y:1987:i:2:p:378-87

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Cited by:
  1. Khandker, A. Wahhab & Rashid, Salim, 1995. "Wage subsidy and full-employment in a dual economy with open unemployment and surplus labor," Journal of Development Economics, Elsevier, vol. 48(1), pages 205-223, October.
  2. S.M. Turab Hussain, 2005. "Migration, Policy and Welfare in the Context of Developing Economies : A Simple Extended Family Approach," Development Economics Working Papers 22256, East Asian Bureau of Economic Research.
  3. Ira N. Gang & Myeong-Su Yun, 2006. "Immigration Amnesty and Immigrant's Earnings," Departmental Working Papers 200632, Rutgers University, Department of Economics.
  4. Ilhom Abdulloev & Ira N. Gang & John Landon-Lane, 2011. "Migration as a Substitute for Informal Activities: Evidence from Tajikistan," Working Papers 311, Institut f├╝r Ost- und S├╝dosteuropaforschung (Institute for East and South-East European Studies).

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