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

Chisato Yoshida () and Alan Woodland

Chapter 10 in The Economics of Illegal Immigration, 2005, pp 163-171 from Palgrave Macmillan

Abstract: 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.

Keywords: Labor Union; Urban Sector; Rural Sector; Little Develop Country; Wage Elasticity (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-51488-1_10

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DOI: 10.1057/9780230514881_10

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