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Welfare Analysis in an Extended Harris-Todaro Model: An Application of the Atkinson Theorem

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  • Kingi Hautahi

    (Cornell University, Ithaca, NY 14853–0001, USA)

Abstract

I analyze the welfare effects of a policy of modern sector enlargement (MSENL), and a policy of increasing the efficiency of on-the-job search from the urban informal sector (IEOS) in a generalized Harris-Todaro model. I show that MSENL causes a Lorenz worsening of the income distribution and IEOS causes a Lorenz improvement. In a rare direct application of the Atkinson theorem, I conclude that MSENL decreases social welfare and IEOS increases social welfare for all anonymous, increasing and Schur-concave social welfare functions.

Suggested Citation

  • Kingi Hautahi, 2017. "Welfare Analysis in an Extended Harris-Todaro Model: An Application of the Atkinson Theorem," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 17(1), pages 1-9, January.
    • Handle: RePEc:bpj:bejtec:v:17:y:2017:i:1:p:9:n:9
    DOI: 10.1515/bejte-2015-0132
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    References listed on IDEAS

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    1. Fields, Gary S., 1989. "On-the-job search in a labor market model : Ex ante choices and ex post outcomes," Journal of Development Economics, Elsevier, vol. 30(1), pages 159-178, January.
    2. Fields, Gary S., 2005. "A welfare economic analysis of labor market policies in the Harris-Todaro model," Journal of Development Economics, Elsevier, vol. 76(1), pages 127-146, February.
    3. World Bank, 2012. "World Development Report 2013 [Rapport sur le développement dans le monde 2013]," World Bank Publications - Books, The World Bank Group, number 11843, December.
    4. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    5. Dutta, Bhaskar, 2002. "Chapter 12 Inequality, poverty and welfare," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 12, pages 597-633, Elsevier.
    6. World Bank, 2012. "World Development Report 2012 [Rapport sur le développement dans le monde 2012]," World Bank Publications - Books, The World Bank Group, number 4391, December.
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    More about this item

    Keywords

    Lorenz curves; segmented labor markets; inequality; welfare;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D6 - Microeconomics - - Welfare Economics
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy

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