Virtual trade between different time zones, educational capital and corrupt informal sector

Prasad, Alaka Shree and Mandal, Biswajit (2019): Virtual trade between different time zones, educational capital and corrupt informal sector.

Abstract

With the help of a stylized economy resembling the features of a developing country endowed with huge supply of unskilled labor, informality, informality related corruption and limited supply of educational capital we examine how virtual trade with a country located in a geographically different time zone affects the factor prices and subsequently output of different sectors. We show that skilled labors and educational capital owners are the beneficiaries of virtual trade. The service sector expands and the formal and informal good producing sectors contract along with the number of people engaged in corruption related intermediation. Following this, we also check the effect of a fall in the extent of cost of corruption. Results show an increase in unskilled wage and outflow of educational capital thus hurting the skill intensive sector. We proceed further to club the effects of both virtual trade and fall in cost of corruption and explore the consequences. Interestingly, both skilled and unskilled labors benefit. The effect on output and intermediators, however, is ambiguous.

• Item Type: MPRA Paper
• Language: English
• Keywords: Time Zones; Virtual Trade; Service; Educational Capital; Informality; Corruption; Extortion.
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E26 - Informal Economy ; Underground Economy; F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions; F - International Economics > F2 - International Factor Movements and International Business; L - Industrial Organization > L8 - Industry Studies: Services > L86 - Information and Internet Services ; Computer Software; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements

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