Welfare Analysis in an Extended Harris-Todaro Model: An Application of the Atkinson Theorem

Kingi Hautahi ()
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Kingi Hautahi: Cornell University, Ithaca, NY 14853–0001, USA

The B.E. Journal of Theoretical Economics, 2017, vol. 17, issue 1, 9

Abstract: I analyze the welfare effects of a policy of modern sector enlargement (MSENL), and a policy of increasing the efficiency of on-the-job search from the urban informal sector (IEOS) in a generalized Harris-Todaro model. I show that MSENL causes a Lorenz worsening of the income distribution and IEOS causes a Lorenz improvement. In a rare direct application of the Atkinson theorem, I conclude that MSENL decreases social welfare and IEOS increases social welfare for all anonymous, increasing and Schur-concave social welfare functions.

Keywords: Lorenz curves; segmented labor markets; inequality; welfare (search for similar items in EconPapers)
JEL-codes: D3 D6 J6 O2 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/bejte-2015-0132

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