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Specific and mobile capital, migration and unemployment in a Harris-Todaro model

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  • Kul Bhatia

Abstract

Specific- and mobile-capital versions of the Harris-Todaro model are compared in a simple algebraic formulation. The former focuses on wage elasticity of demand in the minimum-wage ( M ) sector ( m M ), whereas the latter also considers elasticities of substitution ( † s). By relating m M and † M , similarities between the conclusions of the two models can be clearly obse M rved and M many of them can be restated as exogenous conditions on the substitution elasticities. A single † , for which econometric estimates are readily available, can drive some key results. Elasticity of substitution in the non-minimum-wage sector, which is rarely discussed in the literature because of its emphasis on the minimum-wage sector, plays an important part. Among the new results, in the mobile-capital formulation, 'large' values of this elasticity ( † A , for which precise, quantifiable expressions are derived) are sufficient to cause outmigration from the M -sector when the minimum wage is increased, irrespective of † M and m M . Numerical examples from a computable general equilibrium model for Mexico illustrate, and in some cases flesh out, some analytical propositions for both versions of the HT model in a small open economy.

Suggested Citation

  • Kul Bhatia, 2001. "Specific and mobile capital, migration and unemployment in a Harris-Todaro model," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 11(2), pages 207-222.
  • Handle: RePEc:taf:jitecd:v:11:y:2001:i:2:p:207-222
    DOI: 10.1080/09638190010110758
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    References listed on IDEAS

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    1. Neary, J Peter, 1981. "On the Harris-Todaro Model with Intersectoral Capital Mobility," Economica, London School of Economics and Political Science, vol. 48(191), pages 219-234, August.
    2. 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.
    3. Funatsu, Hideki, 1988. "A Note on the Stability of the Harris-Todaro Model with Capital Mobility," Economica, London School of Economics and Political Science, vol. 55(217), pages 119-121, February.
    4. Neary, Peter, 1988. "Stability of the Mobile-Capital Harris-Todaro Model: Some Further Results," Economica, London School of Economics and Political Science, vol. 55(217), pages 123-127, February.
    5. Stark, Oded & Ranjan Gupta, Manash & Levhari, David, 1991. "Equilibrium urban unemployment in developing countries : Is migration the culprit?," Economics Letters, Elsevier, vol. 37(4), pages 477-482, December.
    6. M. Hasan Imam & John Whalley, 1985. "Incidence Analysis of a Sector-Specific Minimum Wage in a Two-Sector Harris-Todaro Model," The Quarterly Journal of Economics, Oxford University Press, vol. 100(1), pages 207-224.
    7. Bhatia, Kul B, 1979. "Rural-Urban Migration and Surplus Labour," Oxford Economic Papers, Oxford University Press, vol. 31(3), pages 403-414, November.
    8. Cole, William E & Sanders, Richard D, 1985. "Internal Migration and Urban Employment in the Third World," American Economic Review, American Economic Association, vol. 75(3), pages 481-494, June.
    9. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
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    Cited by:

    1. Vassilis T. Rapanos, 2005. "Minimum Wage And Income Distribution In The Harris-Todaro Model," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 30(1), pages 1-14, June.

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