Informal Wage, Informal Price and Extortion under Migration and Tariff Reform

Mandal, Biswajit and Chaudhuri, Saswati (2011): Informal Wage, Informal Price and Extortion under Migration and Tariff Reform.

Abstract

In this paper we propose a theoretical model where formal and informal sectors co-exist in tandem. Trade union segregates some labor from being formal. Capital is not allowed to freely move between formal and informal sectors. Using this sort of framework it has been shown that immigration of unskilled workers reduces the return to informal labor and makes the informal good relatively cheaper. A tariff slash also impinges on similar kind of results. In both the cases informal capitalists gain. Moreover, what is more striking is that both migration and tariff reform are equally bad for the economy as a whole since these policies enhance the ‘unproductive’ element or labor in the society which is really costly as these laborers could have been used to produce some more consumable commodities.

• Item Type: MPRA Paper
• Language: English
• Keywords: International Trade; Corruption/Extortion; Informal sector; Migration;General Equilibrium.
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; D - Microeconomics > D5 - General Equilibrium and Disequilibrium; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R23 - Regional Migration ; Regional Labor Markets ; Population ; Neighborhood Characteristics

References

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