GEP 13/07: Liberalization and 'Jobless Growth' in a Developing Economy: Some Extended Results

Summary

This paper studies, using three-sector mobile-capital version of Harris-Todaro model with agricultural dualism within the rural economy, implications of a tariff-cut and a labour market reform on welfare and urban unemployment.

Abstract

This paper, in terms of a three-sector mobile capital version of Harris-Todaro type generalequilibrium model of rural-urban migration with agricultural dualism and a non-traded intermediate input, tries to theoretically explain why a developing country may experience a ‘jobless growth’ during liberalised regime as suggested by empirical evidences. I have considered impacts of trade liberalization (captured by a tariff-reform in the protected import-competing sector) and liberalization of labour laws (captured by a reduction in the bargaining strength of the labour unions). These findings are particularly interesting for their contradiction to the predictions of standard Harris-Todaro model.

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Authors

Soumyatanu Mukherjee

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