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Recessionary shock, capital mobility and the informal sector

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  • Mandal, Biswajit
  • Marjit, Sugata
  • Beladi, Hamid

Abstract

Using the hybrid of Heckscher - Ohlin and Specific Factor models of trade we show that economic recession led shock results in a loss for both capitalists and skilled workers. Some of the unionized unskilled workers lose formal sector employment and move onto the informal sector. In case capital moves from formal to the informal, informal employment and wage both can go up in the informal segment. If capital does not move informal employment expands and wage drops. Thus recession may actually benefit a large number of informal workers.

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File URL: http://mpra.ub.uni-muenchen.de/33736/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33736.

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Date of creation: Aug 2010
Date of revision: Jan 2011
Handle: RePEc:pra:mprapa:33736

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Keywords: International Trade; Informal sector; General Equilibrium;

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References

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  1. Brecher, Richard A. & Diaz Alejandro, Carlos F., 1977. "Tariffs, foreign capital and immiserizing growth," Journal of International Economics, Elsevier, vol. 7(4), pages 317-322, November.
  2. Marjit, Sugata & Kar, Saibal & Chaudhuri, Sarbajit, 2011. "Recession in the skilled sector and implications for informal wage," Research in Economics, Elsevier, vol. 65(3), pages 158-163, September.
  3. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
  4. Jones, R.W. & Marjit, S., 1992. "International Trade and Endogenous Production Structures," RCER Working Papers 312, University of Rochester - Center for Economic Research (RCER).
  5. Ronald Jones & Sugata Marjit, 2009. "Competitive trade models and real world features," Economic Theory, Springer, vol. 41(1), pages 163-174, October.
  6. Beladi, Hamid & Chao, Chi-Chur, 1993. "Non-traded goods, urban unemployment and welfare in LDCs," European Journal of Political Economy, Elsevier, vol. 9(2), pages 281-292, May.
  7. Chaudhuri, Sarbajit, 2009. "Economic Recession and Informal Sector Workers," MPRA Paper 18033, University Library of Munich, Germany.
  8. Marjit, Sugata, 2003. "Economic reform and informal wage--a general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 371-378, October.
  9. Beladi, Hamid & Yabuuchi, Shigemi, 2001. "Tariff-induced capital inflow and welfare in the presence of unemployment and informal sector," Japan and the World Economy, Elsevier, vol. 13(1), pages 51-60, January.
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Cited by:
  1. Beladi, Hamid & Mandal, Biswajit, 2011. "Recessionary shock and factor return in an underemployed economy," MPRA Paper 33733, University Library of Munich, Germany.

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