Industrial Development, Polarisation, and Fiscal Policy in an Underemployment Economy

Tetsuya Nakajima ()

MPRA Paper from University Library of Munich, Germany

Abstract: Industrial development is often accompanied by massive migration from agricultural to industrial areas. This paper compares two steady states, the first and the second, which emerge before and after the termination of such migration, respectively. The paper shows that 1) the employment rate must be lower in the second steady state, and that 2) while every household increases individual assets in the first steady state, households may polarise into the poor and the rich in the second steady state. By examining the effects of fiscal policy, the paper also shows that the balanced budget multiplier exceeds unity, and accordingly, fiscal policy raises households’ disposable income and consumption.

Keywords: industrial development; migration; underemployment; wealth distribution; polarisation (search for similar items in EconPapers)
JEL-codes: E21 E24 E62 O11 (search for similar items in EconPapers)
Date: 2013-10-12
New Economics Papers: this item is included in nep-mac and nep-pbe
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:54908

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