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Economic Liberalization and Informal Wage in a Small Open Economy: Does Capital Mobility count?

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  • Chaudhuri, Sarbajit
  • Banerjee, Dibyendu

Abstract

Empirical evidence suggests that the size of the informal sector in the developing countries has increased considerably during the liberalized economic regime. The present paper purports to analyze the consequences of economic reforms on the wellbeing of the informal sector workforce using a three-sector general equilibrium model with two informal sectors. The theoretical analysis finds that different liberalized policies produce diverse effects on the informal wage and that these results are independent of the nature of capital mobility between the informal and the formal sectors. It also shows that labour market reforms, contrary to the common wisdom, are likely to produce favourable effects on the informal wage.

Suggested Citation

  • Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2006. "Economic Liberalization and Informal Wage in a Small Open Economy: Does Capital Mobility count?," MPRA Paper 1353, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:1353
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    References listed on IDEAS

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    Cited by:

    1. Mitra, Sudeshna & Gupta, Kausik, 2017. "Liberalization and Welfare Conditions of a Developing Economy: A General Equilibrium Analysis," MPRA Paper 85230, University Library of Munich, Germany.

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    More about this item

    Keywords

    Informal sector; formal sector; informal wage; economic reforms; capital mobility; general equilibrium model;
    All these keywords.

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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