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Optimal Policies in a Dual Economy with Open Unemployment and Surplus Labour

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  • Gang, Ira N
  • Gangopadhyay, Shubhashis

Abstract

This paper considers a dual economy in which the urban sector has open unemployment while the rural sector has surplus labor. The model is a n extension of the Harris-Todaro (1970) framework as developed by Kul B. Bhatia (1979), where full employment is said to exist when open u nemployment and surplus labor are eliminated. The authors characteriz e this full employment equilibrium and the conditions for technical e fficiency and, in addition, show the existence of a unique pair of op timal wage subsidies to each sector. Unlike the earlier uniform wage subsidies, they show that an optimal subsidy is not uniform across se ctors. Copyright 1987 by Royal Economic Society.

Suggested Citation

  • Gang, Ira N & Gangopadhyay, Shubhashis, 1987. "Optimal Policies in a Dual Economy with Open Unemployment and Surplus Labour," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 378-387, June.
  • Handle: RePEc:oup:oxecpp:v:39:y:1987:i:2:p:378-87
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    Citations

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    Cited by:

    1. Osman Suliman, 1999. "Indonesian Labour in Transition: An East Asian Success Story? By Chris Manning. Cambridge, UK: Cambridge University Press, 1998. Pp. xxii, 323. $59.95," Southern Economic Journal, John Wiley & Sons, vol. 65(3), pages 659-661, January.
    2. Khandker, A. Wahhab & Rashid, Salim, 1995. "Wage subsidy and full-employment in a dual economy with open unemployment and surplus labor," Journal of Development Economics, Elsevier, vol. 48(1), pages 205-223, October.
    3. Ira N. Gang & Myeong-Su Yun, 2007. "Immigration Amnesty and Immigrant's Earnings," Research in Labor Economics, in: Immigration, pages 273-309, Emerald Group Publishing Limited.
    4. Ilhom Abdulloev & Ira N. Gang & John Landon-Lane, 2011. "Migration as a Substitute for Informal Activities: Evidence from Tajikistan," Working Papers 311, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    5. Amitava Krishna Dutt, 1989. "Sectoral Balance: A Survey," WIDER Working Paper Series wp-1989-056, World Institute for Development Economic Research (UNU-WIDER).
    6. Sugata Marjit & Biswajit Mandal, 2016. "International Trade, Migration and Unemployment – The Role of Informal Sector," Economics and Politics, Wiley Blackwell, vol. 28(1), pages 8-22, March.
    7. Ira N. Gang & Edward Tower, 1990. "Allocating Jobs under a Minimum Wage: Queues vs. Lotteries," The Economic Record, The Economic Society of Australia, vol. 66(3), pages 186-194, September.
    8. S.M. Turab Hussain, 2005. "Migration, Policy and Welfare in the Context of Developing Economies : A Simple Extended Family Approach," Development Economics Working Papers 22256, East Asian Bureau of Economic Research.
    9. Amarjyoti Mahanta, 2022. "The transition of labour in the presence of adaptation cost and labour market segmentation," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 109-125, February.

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