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On-The-Job Search, Urban Informal Sector And The Development Policies-A General Equilibrium Analysis

  • Titas Bandopadhyay

    (Bagnan College)

The purpose of this paper is to examine the Fields (1989) proposition1 in a multi sector general equilibrium model with perfect and imperfect capital mobility2. The effects of different fiscal policies on the equilibrium rate of urban unemployment are also examined here3. The main findings are more efficient on-the-job search from the rural sector raises equilibrium urban unemployment rate whereas increased job search efficiency from the urban informal sector lowers this rate. Again urban subsidy policy lowers the equilibrium urban unemployment rate and rural subsidy policy raises this rate. Urban formal sector enlargement leads to a change in ex-ante and ex-post labour force in the rural sector even if urban informal sector wage rate is constant. All the results are obtained both in the case of perfect and imperfect capital mobility.

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Paper provided by EconWPA in its series GE, Growth, Math methods with number 0511004.

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Date of creation: 05 Nov 2005
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Handle: RePEc:wpa:wuwpge:0511004
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  1. McCool, Thomas J, 1982. "Wage Subsidies and Distortionary Taxes in a Mobile Capital Harris-Todaro Model," Economica, London School of Economics and Political Science, vol. 49(193), pages 69-79, February.
  2. Stark, Oded, 1982. "On modelling the informal sector," World Development, Elsevier, vol. 10(5), pages 413-416, May.
  3. Hamada, Koichi, 1974. "An economic analysis of the duty-free zone," Journal of International Economics, Elsevier, vol. 4(3), pages 225-241, August.
  4. Quibria, M G, 1988. "Migration, Trade Unions, and the Informal Sector: A Note on Calvo," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 29(3), pages 557-63, August.
  5. Rauch, James E., 1991. "Modelling the informal sector formally," Journal of Development Economics, Elsevier, vol. 35(1), pages 33-47, January.
  6. Khan, M. Ali, 1980. "The Harris-Todaro hypothesis and the Heckscher-Ohlin-Samuelson trade model : A synthesis," Journal of International Economics, Elsevier, vol. 10(4), pages 527-547, November.
  7. Gupta, Manash Ranjan, 1995. "Tax on foreign capital income and wage subsidy to the urban sector in the Harris-Todaro model," Journal of Development Economics, Elsevier, vol. 47(2), pages 469-479, August.
  8. Gupta, Manash Ranjan, 1994. "Foreign capital, income inequality and welfare in a Harris-Todaro model," Journal of Development Economics, Elsevier, vol. 45(2), pages 407-414, December.
  9. Grinols, Earl L, 1991. "Unemployment and Foreign Capital: The Relative Opportunity Costs of Domestic Labour and Welfare," Economica, London School of Economics and Political Science, vol. 58(229), pages 107-21, February.
  10. 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.
  11. Beladi, H. & Marjit, S., 1992. "Foreign Capital and Protectionism," RCER Working Papers 310, University of Rochester - Center for Economic Research (RCER).
  12. Chandra, Vandana & Khan, M Ali, 1993. "Foreign Investment in the Presence of an Informal Sector," Economica, London School of Economics and Political Science, vol. 60(237), pages 79-103, February.
  13. Basu, Kaushik C, 1980. "Optimal Policies in Dual Economies," The Quarterly Journal of Economics, MIT Press, vol. 95(1), pages 187-96, August.
  14. Chaudhuri, T. Datta & Adhikari, Smita, 1993. "Free trade zones with Harris-Todaro unemployment A note on Young-Miyagiwa," Journal of Development Economics, Elsevier, vol. 41(1), pages 157-162, June.
  15. 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.
  16. Fields, Gary S., 1975. "Rural-urban migration, urban unemployment and underemployment, and job-search activity in LDCs," Journal of Development Economics, Elsevier, vol. 2(2), pages 165-187, June.
  17. Chaudhuri, Tamal Datta, 1989. "A theoretical analysis of the informal sector," World Development, Elsevier, vol. 17(3), pages 351-355, March.
  18. 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 481-94, June.
  19. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  20. Lundborg, Per, 1990. "Rural-urban migration and the transition from traditional to modern agriculture," Journal of Development Economics, Elsevier, vol. 33(2), pages 287-307, October.
  21. Gupta, Manash Ranjan, 1993. "Rural-urban migation, informal sector and development policies A theoretical analysis," Journal of Development Economics, Elsevier, vol. 41(1), pages 137-151, June.
  22. 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.
  23. Jones, Ronald W. & Easton, Stephen T., 1983. "Factor intensities and factor substitution in general equilibrium," Journal of International Economics, Elsevier, vol. 15(1-2), pages 65-99, August.
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