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The Costs of Dualism

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  • Jonathan Temple

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Abstract

This paper shows how to calibrate a two-sector general equilibrium model of production using a small number of parameter assumptions and readily available data. The framework is then used to analyze the costs of labor market dualism. The paper quantiÞes the effects of rural-urban wage differentials and urban unemployment on total output, wages and returns to capital, factor shares, and sectoral structure. One of the main Þndings is that labor market rigidities can have a major impact on the extent of industrialization.

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Bibliographic Info

Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 02/532.

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Length: 34 pages
Date of creation: Apr 2002
Date of revision:
Handle: RePEc:bri:uobdis:02/532

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Keywords: dualism; productivity; wage differentials; minimum wages;

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References

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  1. Bryan Graham & Jonathan Temple, 2006. "Rich Nations, Poor Nations: How Much Can Multiple Equilibria Explain?," Journal of Economic Growth, Springer, Springer, vol. 11(1), pages 5-41, 03.
  2. Corden, W M & Findlay, Ronald, 1975. "Urban Unemployment, Intersectoral Capital Mobility and Development Policy," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 42(165), pages 59-78, February.
  3. Charles A. Ingene, 2001. "The State of the Art in Modeling Migration in LDCS: A Comment," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 41(3), pages 529-543.
  4. Albert Fishlow & Paul A. David, 1961. "Optimal Resource Allocation in an Imperfect Market Setting," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 69, pages 529.
  5. MacLeod, W Bentley & Malcomson, James M, 1998. "Motivation and Markets," American Economic Review, American Economic Association, American Economic Association, vol. 88(3), pages 388-411, June.
  6. Moene, Karl Ove, 1988. "A reformulation of the Harris-Todaro mechanism with endogenous wages," Economics Letters, Elsevier, Elsevier, vol. 27(4), pages 387-390.
  7. de Melo, Jaime A P, 1977. "Distortions in the Factor Market: Some General Equilibrium Estimates," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 59(4), pages 398-405, November.
  8. Rosenzweig, Mark R., 1988. "Labor markets in low-income countries," Handbook of Development Economics, Elsevier, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 15, pages 713-762 Elsevier.
  9. Klump, Rainer & Preissler, Harald, 2000. " CES Production Functions and Economic Growth," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 102(1), pages 41-56, March.
  10. Mincer, Jacob, 1976. "Unemployment Effects of Minimum Wages," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(4), pages S87-104, August.
  11. Bourguignon, F. & Morrisson, C., 1995. "Inequality and Development: The Role of Dualism," DELTA Working Papers, DELTA (Ecole normale supérieure) 95-32, DELTA (Ecole normale supérieure).
  12. Magnac, Th, 1991. "Segmented or Competitive Labor Markets," Econometrica, Econometric Society, Econometric Society, vol. 59(1), pages 165-87, January.
  13. Hatton, Timothy J. & Williamson, Jeffrey G., 1991. "Integrated and Segmented Labor Markets: Thinking in Two Sectors," The Journal of Economic History, Cambridge University Press, Cambridge University Press, vol. 51(02), pages 413-425, June.
  14. Basu, Kaushik C, 1980. "Optimal Policies in Dual Economies," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 95(1), pages 187-96, August.
  15. Fields, Gary S., 1997. "Wage floors and unemployment: A two-sector analysis," Labour Economics, Elsevier, Elsevier, vol. 4(1), pages 85-91, March.
  16. Chao, Chi-Chur & Yu, Eden S. H., 1992. "Capital markets, urban unemployment and land," Journal of Development Economics, Elsevier, Elsevier, vol. 38(2), pages 407-413, April.
  17. Yabuuchi, Shigemi, 1993. "Urban unemployment, international capital mobility and development policy," Journal of Development Economics, Elsevier, Elsevier, vol. 41(2), pages 399-403, August.
  18. Jeremiah. Allen, 2001. "The State of the Art in Modeling Migration in the LDCS: A Comment," Journal of Regional Science, Wiley Blackwell, Wiley Blackwell, vol. 41(3), pages 521-528.
  19. Robinson, Sherman, 1989. "Multisectoral models," Handbook of Development Economics, Elsevier, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 2, chapter 18, pages 885-947 Elsevier.
  20. Jones, Ronald W, 1971. "Distortions in Factor Markets and the General Equilibrium Model of Production," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 79(3), pages 437-59, May-June.
  21. Freeman, Richard B, 1993. "Labor Markets and Institutions in Economic Development," American Economic Review, American Economic Association, American Economic Association, vol. 83(2), pages 403-08, May.
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Cited by:
  1. Areendam Chanda & Carl-Johan Dalgaard, 2003. "Dual Economies and International Total Factor Productivity Differences," Macroeconomics, EconWPA 0305002, EconWPA.

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