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Informal Wage, Informal Price and Extortion under Migration and Tariff Reform

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  • Mandal, Biswajit
  • Chaudhuri, Saswati

Abstract

In this paper we propose a theoretical model where formal and informal sectors co-exist in tandem. Trade union segregates some labor from being formal. Capital is not allowed to freely move between formal and informal sectors. Using this sort of framework it has been shown that immigration of unskilled workers reduces the return to informal labor and makes the informal good relatively cheaper. A tariff slash also impinges on similar kind of results. In both the cases informal capitalists gain. Moreover, what is more striking is that both migration and tariff reform are equally bad for the economy as a whole since these policies enhance the ‘unproductive’ element or labor in the society which is really costly as these laborers could have been used to produce some more consumable commodities.

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  • Mandal, Biswajit & Chaudhuri, Saswati, 2010. "Informal Wage, Informal Price and Extortion under Migration and Tariff Reform," MPRA Paper 28704, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:28704
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    References listed on IDEAS

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    13. Sarbajit Chaudhuri, 2003. "How and how far to liberalize a developing economy with informal sector and factor market distortions," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 12(4), pages 403-428.
    14. Amaral, Pedro S. & Quintin, Erwan, 2006. "A competitive model of the informal sector," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1541-1553, October.
    15. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
    16. Ronald Jones & Sugata Marjit, 2009. "Competitive trade models and real world features," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(1), pages 163-174, October.
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    Cited by:

    1. Mandal, Biswajit & Roy, Sangita, 2017. "Trade liberalization, Skilled Intermediate input and Wage Distribution," MPRA Paper 87459, University Library of Munich, Germany.
    2. Biswajit Mandal & Alaka Shree Prasad, 2020. "A simple model of time zone differences, virtual trade and informality," Indian Growth and Development Review, Emerald Group Publishing Limited, vol. 14(1), pages 81-96, June.
    3. Mandal, Biswajit & Roy, Sangita, 2016. "Trade liberalization and wage distribution when skilled intermediate input is used in import competing sector that uses a commom type of capital," MPRA Paper 87460, University Library of Munich, Germany.

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    More about this item

    Keywords

    International Trade; Corruption/Extortion; Informal sector; Migration; General Equilibrium.;
    All these keywords.

    JEL classification:

    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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