A Multi-sector Model of LDC

Prabir C Bhattacharya

Scottish Journal of Political Economy, 1994, vol. 41, issue 3, 225-55

Abstract: This paper develops a model of LDC that systematically incorporates an informal sector. The implications of the model presented in this paper, in particular, are seen to be directly opposed to the fundamental implications of the Lewis-type models. The model also questions the conventional wisdom that decreases in the formal-sector minimum wage and increases in the maximum size of firm above which this minimum is enforced will help workers in the informal sector, the essential argument being that these policies may have adverse terms-of-trade effects on the informal sector that offset their favorable labor-market effects. Copyright 1994 by Scottish Economic Society.

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:bla:scotjp:v:41:y:1994:i:3:p:225-55

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