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Bureaucratic reform, informal sector and welfare

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  • Chaudhuri, Sarbajit
  • Mandal, Biswajit

Abstract

In this paper we formulate a three-sector general equilibrium model where one sector produces a service or good used as an intermediate input in two other sectors. Intermediate input here resembles bureaucratic (in)efficiency/control, red-tapism etc. in light of these concerns we introduce informal sector where wage is determined through competitive mechanism. We show that informal wage must go up if bureaucratic efficiency increases in general or if informal sector becomes less prone to bureaucracy related menace. However, in the welfare front the eventual impact depends on whether labor reallocation effect can outweigh the tariff revenue effect.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 36072.

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Date of creation: 15 Jan 2012
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Handle: RePEc:pra:mprapa:36072

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Keywords: : General equilibrium; Intermediation; Informal sector; Welfare;

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References

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  1. 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.
  2. Chaudhuri, Sarbajit & Gupta, Manash Ranjan, 1996. "Delayed formal credit, bribing and the informal credit market in agriculture: A theoretical analysis," Journal of Development Economics, Elsevier, vol. 51(2), pages 433-449, December.
  3. Chaudhuri, Sarbajit & Dastidar, Krishnendu Ghosh, 2011. "Corruption in a model of vertical linkage between formal and informal credit sources and credit subsidy policy," Economic Modelling, Elsevier, vol. 28(6), pages 2596-2599.
  4. Gautam Bose & Shubhashis Gangopadhyay, 2009. "Intermediation in corruption markets," Indian Growth and Development Review, Emerald Group Publishing, vol. 2(1), pages 39-55, April.
  5. Gautam Bose, 2010. "Aspects of Bureaucratic Corruption," Discussion Papers 2010-14, School of Economics, The University of New South Wales.
  6. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
  7. Marjit, Sugata & Mukherjee, Vivekananda & Mukherjee, Arijit, 2003. "Harassment, corruption and tax policy: reply," European Journal of Political Economy, Elsevier, vol. 19(4), pages 899-900, November.
  8. Subhayu Bandyopadhyay & Suryadipta Roy, 2006. "Corruption and Trade Protection: Evidence from Panel Data," Working Papers 06-11 Classification- JEL, Department of Economics, West Virginia University.
  9. Sugata Marjit & Amit K. Biswas, 2011. "Informality, Corruption and Trade Reform," Trade Working Papers 22896, East Asian Bureau of Economic Research.
  10. Guriev, Sergei, 2003. "Red Tape and Corruption," CEPR Discussion Papers 3972, C.E.P.R. Discussion Papers.
  11. Marjit, Sugata & Shi, Heling, 1998. "On controlling crime with corrupt officials," Journal of Economic Behavior & Organization, Elsevier, vol. 34(1), pages 163-172, January.
  12. Bhagwati, Jagdish N. & Srinivasan, T. N., 1982. "The welfare consequences of directly-unproductive profit-seeking (DUP) lobbying activities : Price versus quantity distortions," Journal of International Economics, Elsevier, vol. 13(1-2), pages 33-44, August.
  13. 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.
  14. Sugata Marjit & Biswajit Mandal, 2012. "Domestic trading costs and pure theory of international trade," International Journal of Economic Theory, The International Society for Economic Theory, vol. 8(2), pages 165-178, 06.
  15. Bose, Gautam, 2004. "Bureaucratic delays and bribe-taking," Journal of Economic Behavior & Organization, Elsevier, vol. 54(3), pages 313-320, July.
  16. Gupta, Manash Ranjan & Chaudhuri, Sarbajit, 1997. "Formal Credit, Corruption and the Informal Credit Market in Agriculture: A Theoretical Analysis," Economica, London School of Economics and Political Science, vol. 64(254), pages 331-43, May.
  17. 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.
  18. Marjit, Sugata, 2003. "Economic reform and informal wage--a general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 371-378, October.
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