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Inflow of educational capital, trade liberalization, skill formation and informal sector

Author

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  • Biswajit Mandal

    (Visva-Bharati University)

  • Sangita Roy

    (Visva-Bharati University)

Abstract

This paper talks about a small open economy comprising of three sectors: two formal sectors and one informal sector. One of these formal sectors uses a specific factor which is specially trained labor. “Special training” can easily encompass the issues such as vocational training, technical training, computer literacy, software knowledge etc. Unskilled workers have the option of being trained to get a job in high wage skilled sector or to be employed in the informal sector. In such situation, an inflow of educational capital leads to a change in informal wage while formal wage and rental will remain unchanged. Under reasonable condition informal wage may even go up. Though we have mixed effect in formal sector, informal sector must shrink. An extended version of the model with the incorporation of the effect of trade liberalization policy predicts just the opposite results with regard to informal output and formal wage.

Suggested Citation

  • Biswajit Mandal & Sangita Roy, 2018. "Inflow of educational capital, trade liberalization, skill formation and informal sector," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(1), pages 115-129, April.
    • Handle: RePEc:spr:eurase:v:8:y:2018:i:1:d:10.1007_s40822-017-0083-z
    DOI: 10.1007/s40822-017-0083-z
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    References listed on IDEAS

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    Cited by:

    1. Mehmet Huseyin Bilgin, 2019. "Trade Liberalization: Is It Desirable for All Developing Economies?: A Literature Review," Research in World Economy, Research in World Economy, Sciedu Press, vol. 10(3), pages 199-204, December.
    2. Prasad, Alaka Shree & Mandal, Biswajit, 2019. "Virtual trade between different time zones, educational capital and corrupt informal sector," MPRA Paper 96963, University Library of Munich, Germany.
    3. Biswajit Mandal & Sugata Marjit & Noritsugu Nakanishi, 2018. "Outsourcing, factor prices and skill formation in countries with non-overlapping time zones," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 289-304, August.
    4. Alaka Shree Prasad & Biswajit Mandal, 2019. "Time zone difference, skill formation and corrupt informal sector: the role of virtual trade," Indian Economic Review, Springer, vol. 54(2), pages 261-290, December.

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    More about this item

    Keywords

    Educational capital; Informal sector; Trade liberalization;
    All these keywords.

    JEL classification:

    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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