Welfare implications of technological progress with segmented factor markets

Mukherjee, Soumyatanu and Zafar, Sameen (2014): Welfare implications of technological progress with segmented factor markets.

Abstract

Using a Heckscher-Ohlin-Samuelson type general equilibrium framework with segmented factor markets, we show that uniform technological progress in either the unorganized or the fixed wage organized sector can improve the real income of a small, open developing economy. However, uniform productivity improvement in the unorganized sector turns out to be relatively more egalitarian since it helps the marginalized informal workers in terms of wage-earnings and employment whereas productivity take-off in the organized sector hurts them.

• Item Type: MPRA Paper
• Language: English
• Keywords: Technological progress; general equilibrium, segmented factor markets; welfare
• Subjects: F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade; F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements

References

Agenor, P R (1996) The Labor Market and Economic Adjustment. IMF Staff Papers 32: 261 – 335.

Basu, K (1984) The Less Developed Economy. OUP: New Delhi.

Basu, K (1998) Analytical Development Economics: The Less Developed Economy Revisited. OUP; Delhi, Calcutta, Chennai, Mumbai.

Basu, K and Bell, C (1991) Fragmented duopoly: theory and applications to backward agriculture. J Dev Econ 36: 259 – 81.

Beladi, H, Chaudhuri, S and Yabuuchi, S (2008) Can International Factor Mobility Reduce Wage Inequality in a Dual Economy? Rev Int. Econ 16: 893 – 903.

Beladi, H, Vina, L De la and Marjit, S (2012) Technological Progress with Segmented Labor Markets. Rev Dev Econ 16: 148 – 152. doi: 10.1111/j.1467-9361.2011.00651.x.

Besley, T. and Burgess, R. (2004) Can Labor Regulation Hinder Economic Performance? Evidence from India. Q J Econ 119: 91-134.

Bhaduri, A. (1977) On the formation of usurious interest rates in backward agriculture. Cambridge J Econ 1: 341 – 52.

Bhalotra, S. (2002) The Impact of Economic Liberalisation on Employment and wages in India. ILO, Geneva.

Bottomley, A. (1975) Interest determination in underdeveloped rural areas. American J Agr Econ 57, 279 – 91