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Bureaucratic reform, informal sector and welfare

Sarbajit Chaudhuri () and Biswajit Mandal

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we formulate a three-sector general equilibrium model where one sector produces a service or good used as an intermediate input in two other sectors. Intermediate input here resembles bureaucratic (in)efficiency/control, red-tapism etc. in light of these concerns we introduce informal sector where wage is determined through competitive mechanism. We show that informal wage must go up if bureaucratic efficiency increases in general or if informal sector becomes less prone to bureaucracy related menace. However, in the welfare front the eventual impact depends on whether labor reallocation effect can outweigh the tariff revenue effect.

Keywords: : General equilibrium; Intermediation; Informal sector; Welfare (search for similar items in EconPapers)
JEL-codes: D50 D73 O17 D60 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-iue
Date: 2012-01-15
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