IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/5325.html
   My bibliography  Save this paper

Consumption efficiency hypothesis and the HOS model: Some counterintuitive results

Author

Listed:
  • Chaudhuri, Sarbajit
  • Banerjee, Dibyendu

Abstract

We show how accommodation of the consumption efficiency hypothesis can explain the existence of involuntary unemployment in the two-by-two Heckscher-Ohlin-Samuelson (HOS) model. Although the workers consume both the commodities their nutritional efficiency depends on the consumption of one commodity only. An increase in the relative price of the capital-intensive (labour-intensive) good raises (lowers) the effective employment in the economy. The effects of commodity price changes on the output levels of the two sectors might be perverse. These results are different from the standard HOS results.

Suggested Citation

  • Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2007. "Consumption efficiency hypothesis and the HOS model: Some counterintuitive results," MPRA Paper 5325, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:5325
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/5325/1/MPRA_paper_5325.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dasgupta, Partha & Ray, Debraj, 1986. "Inequality as a Determinant of Malnutrition and Unemployment: Theory," Economic Journal, Royal Economic Society, vol. 96(384), pages 1011-1034, December.
    2. Stiglitz, Joseph E, 1976. "The Efficiency Wage Hypothesis, Surplus Labour, and the Distribution of Income in L.D.C.s," Oxford Economic Papers, Oxford University Press, vol. 28(2), pages 185-207, July.
    3. Ronald W. Jones, 2018. "The Structure of Simple General Equilibrium Models," World Scientific Book Chapters, in: International Trade Theory and Competitive Models Features, Values, and Criticisms, chapter 4, pages 61-84, World Scientific Publishing Co. Pte. Ltd..
    4. Harvey Leibenstein, 1958. "Underemployment in Backward Economies: Some Additional Notes," Journal of Political Economy, University of Chicago Press, vol. 66(3), pages 256-256.
    5. Bose, Gautam, 1996. "Agrarian efficiency wages in a dual economy," Journal of Development Economics, Elsevier, vol. 49(2), pages 371-386, May.
    6. Dipak Mazumdar, 1959. "The Marginal Productivity Theory of Wages and Disguised Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 26(3), pages 190-197.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chaudhuri, Sarbajit, 2010. "Economic recession, demand constraint and labour markets in a developing economy," MPRA Paper 27433, University Library of Munich, Germany.
    2. Chaudhuri, Sarbajit, 2011. "Labor market reform and incidence of child labor in a developing economy," Economic Modelling, Elsevier, vol. 28(4), pages 1923-1930, July.
    3. Rohan Kanti Khan & Sushobhan Mahata & Ranjanendra Narayan Nag, 2023. "Pandemic Crisis, Contact Intensity and Gender Disparity in a Developing Economy," Economic Papers, The Economic Society of Australia, vol. 42(1), pages 30-53, March.
    4. Dwibedi, Jayanta & Chaudhuri, Sarbajit, 2011. "Poverty alleviation programs, FDI-led growth and child labour under agricultural dualism," MPRA Paper 29997, University Library of Munich, Germany.
    5. Manash Ranjan Gupta & Priya Brata Dutta, 2022. "Taxation, capital accumulation, environment and unemployment in an efficiency wage model," Journal of Economics, Springer, vol. 135(2), pages 151-198, March.
    6. Gupta, Manash Ranjan & Dutta, Priya Brata, 2011. "Skilled-unskilled wage inequality and unemployment: A general equilibrium analysis," Economic Modelling, Elsevier, vol. 28(4), pages 1977-1983, July.
    7. Priya Brata Dutta, 2014. "Skilled-unskilled wage inequality, product variety and unemployment: A static general equilibrium analysis," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(1), pages 31-55, February.

    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. Kaushik Basu & Amanda J. Felkey, 2009. "A theory of efficiency wage with multiple unemployment equilibria: how a higher minimum wage law can curb unemployment," Oxford Economic Papers, Oxford University Press, vol. 61(3), pages 494-516, July.
    2. Kaushik Basu, 1987. "A Theory of Surplus Labour," WIDER Working Paper Series wp-1987-021, World Institute for Development Economic Research (UNU-WIDER).
    3. repec:eee:labchp:v:3:y:1999:i:pb:p:2859-2939 is not listed on IDEAS
    4. Albert Marcet & Francesc Obiols-Homs, 2006. "Polarization under incomplete markets and endogenous labor productivity," 2006 Meeting Papers 274, Society for Economic Dynamics.
    5. Basu, Kaushik & Felkey, Amanda, 2004. "A Theory of Efficiency Wage with Community-Based Income Sharing," Working Papers 04-10, Cornell University, Center for Analytic Economics.
    6. Banerji, Sanjay & Gupta, Manas Ranjan, 1997. "The efficiency wage given long-run employment and concave labor constraint," Journal of Development Economics, Elsevier, vol. 53(1), pages 185-195, June.
    7. Naschold, Felix, 2012. "“The Poor Stay Poor”: Household Asset Poverty Traps in Rural Semi-Arid India," World Development, Elsevier, vol. 40(10), pages 2033-2043.
    8. Chaudhuri, Sarbajit & Mukherjee, Ujjaini, 2002. "Removal of protectionism, foreign investment and welfare in a model of informal sector," Japan and the World Economy, Elsevier, vol. 14(1), pages 101-116, January.
    9. Guaracyane Lima Campelo & João Mário Santos De França & Emerson Luís Lemos Marinho, 2016. "Impacts Of Malnutrition On Labor Productivity: Empirical Evidences In Rural Brazil," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 236, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    10. Thorsten Wichmann, 1995. "Food Consumption and Growth in a Two Sector Economy - A Theoretical Model and Numerical Simulations," Berlecon Research Papers 0001, Berlecon Research.
    11. Aysit Tansel & Ceyhan Ozturk & Erkan Erdil, 2021. "The Impact of Body Mass Index on Growth, Schooling, Productivity, and Savings: A Cross-Country Study," Koç University-TUSIAD Economic Research Forum Working Papers 2118, Koc University-TUSIAD Economic Research Forum.
    12. Partha Dasgupta & Debraj Ray, 1987. "Adapting to Undernourishment: The Clinical Evidence and Its Implications," WIDER Working Paper Series wp-1987-010, World Institute for Development Economic Research (UNU-WIDER).
    13. Martin Ravallion, 2016. "Are the world’s poorest being left behind?," Journal of Economic Growth, Springer, vol. 21(2), pages 139-164, June.
    14. Chaudhuri, Sarbajit & Banerjee, Dibyendu, 2007. "Consumption efficiency hypothesis and the optimality of free trade policy in a small open economy," MPRA Paper 4369, University Library of Munich, Germany.
    15. M. Ali Khan, 2007. "The Harris-Todaro Hypothesis," Labor Economics Working Papers 22206, East Asian Bureau of Economic Research.
    16. Dubois, Pierre & Ligon, Ethan, 2009. "Nutrition and Risk Sharing Within the Household," CEPR Discussion Papers 7574, C.E.P.R. Discussion Papers.
    17. Angus Deaton, 2003. "Health, Inequality, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 113-158, March.
    18. Jalan, Jyotsna & Ravallion, Martin, 2001. "Household income dynamics in rural China," Policy Research Working Paper Series 2706, The World Bank.
    19. Subhasankar Chattopadhyay & Rima Mondal, 2017. "Characterisation of Economic Growth in Developing Economies with Informal Sector," Economic Papers, The Economic Society of Australia, vol. 36(1), pages 86-101, March.
    20. Pranab Bardhan, 1993. "Economics of Development and the Development of Economics," Journal of Economic Perspectives, American Economic Association, vol. 7(2), pages 129-142, Spring.
    21. Swamy, Anand V., 1997. "A simple test of the nutrition-based efficiency wage model," Journal of Development Economics, Elsevier, vol. 53(1), pages 85-98, June.

    More about this item

    Keywords

    Consumption efficiency hypothesis; General equilibrium; Heckscher-Ohlin-Samuelson model; Effective employment; Output composition;
    All these keywords.

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

    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:pra:mprapa:5325. 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: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    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.