IDEAS home Printed from https://ideas.repec.org/a/bla/metroe/v73y2022i1p109-125.html
   My bibliography  Save this article

The transition of labour in the presence of adaptation cost and labour market segmentation

Author

Listed:
  • Amarjyoti Mahanta

Abstract

In this paper, we explore the process of transition of labourers from the traditional to the modern sector. The firms in the modern sector can initially differentiate between migrant workers and native workers. However, as the number of workers from the traditional sector increases, the firm cannot segment the labour market. The migrants bear an adaptation cost. The process of transition of labour (migration) is studied through the replicator map. We study the nature of migration in the long run. When adaptation cost monotonically decreases in the share of labourers from the traditional sector engaged in the modern sector, we get an unstable interior equilibrium and two stable equilibria at the boundary. We show convergence to the stable fixed points. When the adaptation cost is non‐monotonic, we get four equilibrium points of which two are stable and two unstable. We get a stable interior equilibrium point implying that only a fraction of labourers is going to shift to the modern sector in the long run. We also show convergence to the stable fixed points under certain conditions on the derivative of the difference equation.

Suggested Citation

  • Amarjyoti Mahanta, 2022. "The transition of labour in the presence of adaptation cost and labour market segmentation," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 109-125, February.
    • Handle: RePEc:bla:metroe:v:73:y:2022:i:1:p:109-125
    DOI: 10.1111/meca.12356
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/meca.12356
    Download Restriction: no
    File URL: https://libkey.io/10.1111/meca.12356?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Simone Bertoli & Ilse Ruyssen, 2018. "Networks and migrants’ intended destination," Journal of Economic Geography, Oxford University Press, vol. 18(4), pages 705-728.
    2. Bhagwati, Jagdish N & Srinivasan, T N, 1974. "On Reanalyzing the Harris-Todaro Model: Policy Rankings in the Case of Sector-Specific Sticky Wages," American Economic Review, American Economic Association, vol. 64(3), pages 502-508, June.
    3. Marjit, Sugata, 1991. "Agro-based industry and rural-urban migration : A case for an urban employment subsidy," Journal of Development Economics, Elsevier, vol. 35(2), pages 393-398, April.
    4. Chaudhuri, Sarbajit, 2007. "Foreign capital, welfare and urban unemployment in the presence of agricultural dualism," Japan and the World Economy, Elsevier, vol. 19(2), pages 149-165, March.
    5. Dao, Thu Hien & Docquier, Frédéric & Parsons, Chris & Peri, Giovanni, 2018. "Migration and development: Dissecting the anatomy of the mobility transition," Journal of Development Economics, Elsevier, vol. 132(C), pages 88-101.
    6. Amartya K. Sen, 1966. "Peasants and Dualism with or without Surplus Labor," Journal of Political Economy, University of Chicago Press, vol. 74, pages 425-425.
    7. Manchin, Miriam & Orazbayev, Sultan, 2018. "Social networks and the intention to migrate," World Development, Elsevier, vol. 109(C), pages 360-374.
    8. Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2010. "Foreign capital inflow, skilled-unskilled wage inequality and unemployment of unskilled labour in a fair wage model," Economic Modelling, Elsevier, vol. 27(1), pages 477-486, January.
    9. Gupta, Manash Ranjan, 1997. "Informal sector and informal capital market in a small open less-developed economy," Journal of Development Economics, Elsevier, vol. 52(2), pages 409-428, April.
    10. Kaivan Munshi, 2003. "Networks in the Modern Economy: Mexican Migrants in the U. S. Labor Market," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(2), pages 549-599.
    11. 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.
    12. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, December.
    13. Joseph E. Stiglitz, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC's: The Labor Turnover Model," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 88(2), pages 194-227.
    14. Marjit, Sugata & Beladi, Hamid, 2003. "Possibility or impossibility of paradoxes in the small country Harris-Todaro framework: a unifying analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 379-385, October.
    15. Gang, Ira N & Gangopadhyay, Shubhashis, 1987. "Optimal Policies in a Dual Economy with Open Unemployment and Surplus Labour," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 378-387, June.
    16. Bulow, Jeremy I & Summers, Lawrence H, 1986. "A Theory of Dual Labor Markets with Application to Industrial Policy,Discrimination, and Keynesian Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(3), pages 376-414, July.
    17. repec:hhs:iuiwop:487 is not listed on IDEAS
    18. S. Enke, 1962. "Economic Development With Unlimited And Limited Supplies Of Labour," Oxford Economic Papers, Oxford University Press, vol. 14(2), pages 158-172.
    19. Sugata Marjit & Biswajit Mandal, 2016. "International Trade, Migration and Unemployment – The Role of Informal Sector," Economics and Politics, Wiley Blackwell, vol. 28(1), pages 8-22, March.
    20. Gary S. Fields, 2004. "Dualism In The Labor Market: A Perspective On The Lewis Model After Half A Century," Manchester School, University of Manchester, vol. 72(6), pages 724-735, December.
    21. Sarbajit Chaudhuri, 2017. "How Could The Credibility Of The Harris–Todaro Model Be Improved?," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 29(3), pages 196-216, November.
    22. Hamid Beladi & Reza Oladi, 2014. "Technical Progress, Urban Unemployment and Heterogeneous Firms," Economics and Politics, Wiley Blackwell, vol. 26(3), pages 519-529, November.
    23. Carrington, William J & Detragiache, Enrica & Vishwanath, Tara, 1996. "Migration with Endogenous Moving Costs," American Economic Review, American Economic Association, vol. 86(4), pages 909-930, September.
    24. Marjit, Sugata & Kar, Saibal, 2011. "The Outsiders: Economic Reform and Informal Labour in a Developing Economy," OUP Catalogue, Oxford University Press, number 9780198071495.
    25. Dale W. Jorgenson, 1967. "Surplus Agricultural Labour And The Development Of A Dual Economy," Oxford Economic Papers, Oxford University Press, vol. 19(3), pages 288-312.
    26. Sarbajit Chaudhuri, 2000. "Rural–Urban Migration, the Informal Sector, Urban Unemployment, and Development Policies: A Theoretical Analysis," Review of Development Economics, Wiley Blackwell, vol. 4(3), pages 353-364, October.
    27. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," The World Bank Economic Review, World Bank, vol. 13(2), pages 275-302, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sugata Marjit & Biswajit Mandal, 2016. "International Trade, Migration and Unemployment – The Role of Informal Sector," Economics and Politics, Wiley Blackwell, vol. 28(1), pages 8-22, March.
    2. Lall, Somik V. & Selod, Harris & Shalizi, Zmarak, 2006. "Rural-urban migration in developing countries : a survey of theoretical predictions and empirical findings," Policy Research Working Paper Series 3915, The World Bank.
    3. Amitava Krishna Dutt, 1989. "Sectoral Balance: A Survey," WIDER Working Paper Series wp-1989-056, World Institute for Development Economic Research (UNU-WIDER).
    4. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," Labor Economics Working Papers 22206, East Asian Bureau of Economic Research.
    5. Sugata Marjit & Reza Oladi, 2020. "Internal Migration, Minimum Rural Wage and Employment Guarantee: Recasting Harris-Todaro," Working Papers 2047, Indian Institute of Foreign Trade.
    6. Gilbert, John & Oladi, Reza, 2009. "Capital specificity, imperfect labor mobility and growth in developing economies," International Review of Economics & Finance, Elsevier, vol. 18(1), pages 113-122, January.
    7. Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2007. "Economic liberalization, capital mobility and informal wage in a small open economy: A theoretical analysis," Economic Modelling, Elsevier, vol. 24(6), pages 924-940, November.
    8. Vandana Chandra & Ralph El-Chami & Jeffrey Fischer, 1991. "Development policies in the presence of unemployment and non-traded intermediate goods," Journal of Economics, Springer, vol. 54(1), pages 1-19, February.
    9. Klöcker, J.A. & Daumann, F., 2023. "What drives migration to Germany? A panel data analysis," Research in Economics, Elsevier, vol. 77(2), pages 251-264.
    10. Hamid Beladi & Avik Chakrabarti & Sugata Marjit, 2010. "Skilled‐Unskilled Wage Inequality And Urban Unemployment," Economic Inquiry, Western Economic Association International, vol. 48(4), pages 997-1007, October.
    11. Chaudhuri, Sarbajit & Biswas, Anindya, 2016. "Endogenous labour market imperfection, foreign direct investment and external terms-of-trade shocks in a developing economy," Economic Modelling, Elsevier, vol. 59(C), pages 416-424.
    12. Chaudhuri, Sarbajit & Mukhopadhyay, Ujjaini, 2009. "Revisiting the Informal Sector: A General Equilibrium Approach," MPRA Paper 52135, University Library of Munich, Germany.
    13. Chen, Jiong, 1994. "The Harris-Todaro model of labor migration and its commercial policy implications," ISU General Staff Papers 1994010108000011587, Iowa State University, Department of Economics.
    14. Mathan Satchi & Jonathan Temple, 2006. "Growth and labour markets in developing countries," Bristol Economics Discussion Papers 06/581, School of Economics, University of Bristol, UK.
    15. Shigemi Yabuuchi, 2011. "Emigration promotion and urban unemployment," Economics Bulletin, AccessEcon, vol. 31(4), pages 2816-2823.
    16. Els BEKEART & Ilse RUYSSEN & Sara SALOMONE, 2021. "Domestic and International Migration Intentions in Response to Environmental Stress: A Global Cross-country Analysis," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 87(3), pages 383-436, September.
    17. Langella, Monica & Manning, Alan, 2021. "Income and the desire to migrate," LSE Research Online Documents on Economics 113875, London School of Economics and Political Science, LSE Library.
    18. Manjusri Bandyopadhyay & Manas Gupta, 1995. "Development policies in the presence of an informal sector: A note," Journal of Economics, Springer, vol. 61(3), pages 301-315, October.
    19. P R Agénor, 2005. "The Analytics of Segmented Labor Markets," Centre for Growth and Business Cycle Research Discussion Paper Series 52, Economics, The University of Manchester.
    20. Mathan Satchi & Jonathan Temple, 2009. "Labor Markets and Productivity in Developing Countries," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 183-204, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:metroe:v:73:y:2022:i:1:p:109-125. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0026-1386 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.