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Desirability And Sequence Of Liberalization And Structural Reform Policies In A Model With Informal Sector

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  • Ujjaini Mukhopadhyay

Abstract

The paper develops a three†sector general equilibrium model with informal sector and examines the welfare effects of liberalization and structural reform in the presence of labor and capital market distortions. It attempts to determine a credible sequence of reforms that may be the most welfare†enhancing, since implementation of reforms in all the markets at a single stage may be neither feasible nor optimal. Foreign capital is welfare†improving only in the presence of labor market distortion, while welfare deteriorates if the capital market is distorted. While tariff and capital market reforms may be welfare†enhancing in the absence of labor market distortion, labor market reform may intensify the formal†informal wage gap and have a worsening effect on welfare in the presence of tariff distortion and capital market imperfection. One of the plausible sequences of reforms may be to initially undertake tariff reform followed by capital and labor market reforms, respectively.

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  • Ujjaini Mukhopadhyay, 2008. "Desirability And Sequence Of Liberalization And Structural Reform Policies In A Model With Informal Sector," Review of Urban & Regional Development Studies, Wiley Blackwell, vol. 20(1), pages 70-84, March.
    • Handle: RePEc:bla:revurb:v:20:y:2008:i:1:p:70-84
    DOI: 10.1111/j.1467-940X.2008.00142.x
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    Cited by:

    1. Mukherjee, Soumyatanu, 2013. "Sector-specific foreign direct investment, factor market distortions and non-immiserising growth," MPRA Paper 52214, University Library of Munich, Germany.
    2. Soumyatanu Mukherjee, 2016. "Tariffs, FDI with technology transfer and welfare in segmented factor markets," Working papers 190, Indian Institute of Management Kozhikode.

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