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Can a Profit-Sharing Scheme Remedy Large Scale Unemployment in a Less Developed Country?

In: The Economics of Illegal Immigration

Author

Listed:
  • Chisato Yoshida
  • Alan D. Woodland

Abstract

In this chapter, we examine the effects of introducing a profit-sharing scheme in the urban sectors of a less developed country (LDC). We use a generalized Harris and Todaro (1970) model in which the LDC has a dual economy with urban-specific unemployment. We assume that the wage of urban labor is determined by a single labor union. We then introduce a profit-sharing scheme in the urban sector. We find that profit-sharing results in a decrease in wages and an increase in employment in the urban sector, an increase in employment and a decrease in wages in the rural sector, and an increase in the welfare of the LDC. We conclude that profit-sharing may remedy the large-scale urban unemployment problems of LDCs and improve the LDC’s welfare.

Suggested Citation

  • Chisato Yoshida & Alan D. Woodland, 2005. "Can a Profit-Sharing Scheme Remedy Large Scale Unemployment in a Less Developed Country?," Palgrave Macmillan Books, in: The Economics of Illegal Immigration, chapter 10, pages 163-171, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-51488-1_10
    DOI: 10.1057/9780230514881_10
    as

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