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Reconsidering the effect of economic development on urban unemployment under non-homothetic preferences

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  • Takeuchi, Nobuyuki
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    Abstract

    We reconsider the effect of economic development on urban unemployment by introducing households with non-homothetic preferences into a sector-specific capital version of the Harris-Todaro model. Contrary to previous studies, this work shows that, while urban development reduces urban unemployment, rural development expands it. As for labor growth, it normally increases urban unemployment.

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    File URL: http://mpra.ub.uni-muenchen.de/39378/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 39378.

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    Date of creation: Jun 2012
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    Handle: RePEc:pra:mprapa:39378

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    Keywords: sector-specific capital; Harris-Todaro model; economic development; non-homothetic preference; urban unemployment;

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    1. Kongsamut, Piyabha & Rebelo, Sérgio & Xie, Danyang, 1997. "Beyond Balanced Growth," CEPR Discussion Papers 1693, C.E.P.R. Discussion Papers.
    2. Jonathan R. W. Temple, 2005. "Growth and Wage Inequality in a Dual Economy," Bulletin of Economic Research, Wiley Blackwell, vol. 57(2), pages 145-169, 04.
    3. Corden, W M & Findlay, Ronald, 1975. "Urban Unemployment, Intersectoral Capital Mobility and Development Policy," Economica, London School of Economics and Political Science, vol. 42(165), pages 59-78, February.
    4. Jai-Young Choi & Eden S. H. Yu, 2006. "Industrial Targeting and Non-shiftable Capital in the Harris-Todaro Model," Review of International Economics, Wiley Blackwell, vol. 14(5), pages 910-921, November.
    5. Echevarria, Cristina, 1997. "Changes in Sectoral Composition Associated with Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 431-52, May.
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