Munich Personal RePEc Archive

Labor market reform and poverty – the role of informal sector

Marjit, Sugata and Kar, Saibal and Maiti, Dibyendu (2008): Labor market reform and poverty – the role of informal sector. Published in: NEW AND ENDURING THEMES IN DEVELOPMENT ECONOMICS: edited by Bhaskar Dutta, Tridip Ray & E Somanathan: NY: World Scientific, 2009 (May 2009): pp. 229-240.

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Abstract

Recent papers, discussing the impact of economic reform in India, argue that the positive effect of reform is more significant in states, which are not ‘labor friendly’. Also labor market reforms seem to be a pre-condition for success of liberal policies as far as their impact on poverty is concerned. We argue that the exact mechanism behind such a link is yet to be clarified. We try to provide such a mechanism in terms of a general equilibrium model involving formal and informal workers. Our framework is capable of providing such a link and shows that there are occasions when such link is violated.

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