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Economic Recession and Informal Sector Workers

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  • Chaudhuri, Sarbajit

Abstract

The paper develops a three-sector specific factor model with Harris-Todaro type unemployment to examine the consequences of economic recession in the skilled sector on the informal sector workforce. It finds that while a decrease in the price of high-skill commodity raises both the informal (rural) sector wage and unemployment of unskilled labour, a drop in emigration of skilled labour produces exactly the opposite effects. The effects of these policies on the welfare of unskilled workers in terms of the welfare measure of Sen (1974) have also been studied. The paper recommends a protectionist policy to the unskilled labour-intensive sector for protecting the interest of the vulnerable section of the working population.

Suggested Citation

  • Chaudhuri, Sarbajit, 2009. "Economic Recession and Informal Sector Workers," MPRA Paper 18033, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:18033
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    File URL: https://mpra.ub.uni-muenchen.de/18033/1/MPRA_paper_18033.pdf
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    References listed on IDEAS

    as
    1. Sen, Amartya, 1974. "Informational bases of alternative welfare approaches : Aggregation and income distribution," Journal of Public Economics, Elsevier, vol. 3(4), pages 387-403, November.
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    Cited by:

    1. Biswajit Mandal, 2016. "Recessionary Shock, Capital Mobility and the Informal Sector," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 17(1), pages 149-162, March.
    2. Beladi, Hamid & Mandal, Biswajit, 2011. "Recessionary shock and factor return in an underemployed economy," MPRA Paper 33733, University Library of Munich, Germany.

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    More about this item

    Keywords

    Skilled labour; unskilled labour; economic recession; informal wage; urban unemployment;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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