Land and Urban Unemployment

This paper re–examines the effects of expansion of land itself on unemployment and welfare in the mobile–capital Harris–Todaro model with land in agriculture. We show the possibility of immiserization and the harmful effects on employment contrary to the conventional results.     

Rural–Urban Migration, the Informal Sector, Urban Unemployment, and Development Policies: A Theoretical Analysis

This paper develops a theoretical model like Gupta's to show the simultaneous existence of the urban informal sector and open unemployment in the urban sector in a Harris–Todaro type of model of rural–urbanmigration. A wage or a price subsidy policy to the rural sector, or a demand management policy like an export promotional scheme in the manufacturing sector, reduces the urban unemployment level, and provides a theoretical basis for the introduction of export promotional measures like the formation of duty-free Export Processing Zones (EPZs) to solve the urban unemployment problem. The policy conclusions of the present paper are different from those found in Gupta's 1993 model.     

Foreign Capital, Urban Unemployment, and Economic Growth

A three-sector endogenous growth model, is used to study the effects of foreign direct investment (FDI) on the dynamics of urban unemployment, labour income, and capital income as well as national welfare in a Harris–Todaro economy. It is shown that more FDI can affect the economy's dynamics and national welfare positively or negatively. The paper derives conditions as to how the growth rate and welfare effects of FDI relate to the intersectoral mobility of capital, the destination of FDI, the elasticities of substitution, and the factor intensities of the final good production.     

Employment Risk and Optimal Trade Policies

This paper considers trade policies and welfare in a Harris–Todaro model with risk-averse workers. Workers are assumed to have identical and homothetic preferences, but their incomes differ, depending on whether and where they are employed. When workers are equally valued, maximizing social utility is equivalent to maximizing the utility of a rural worker. An optimal policy consists of a production subsidy on the exportable and an import tariff. This model explains the widespread use of import tariffs on manufactured goods along with production subsidies on the export sectors in many LDCs.
JEL Classification Numbers: F13, D8.     

Optimal Urban Employment Policies: Notes on Calvo and Quibria

We show that Quibria's insightful observation on the efficacy of urban policy in a model with an urban trade union and an urban informal sector holds, but with a revenue-neutral employment tax-subsidy combination levied on the urban employer. We also draw the relevance of the generalized Harris–Todaro model in providing intuition for the validity of this surprising result.     

Environmental Protection and Urban Unemployment: Environmental Policy Reform in a Polluted Dualistic Economy

This paper explores sufficient conditions for the welfare‐improving environmental policy reform in the Harris–Todaro economy. A rise in the pollution tax rate in the urban manufacturing has spillover effects on the two labor market distortions: the less‐than‐optimal manufacturing employment and the urban unemployment. If both are weakened the welfare improves. Otherwise, we need to develop an alternative sufficient condition. It is shown that there exists a range of welfare‐improving pollution tax rates, and that it corresponds to the lower values of tax rate. This range may shrink by the wage subsidy policy and the technological change toward less pollution‐intensive techniques.     

Imperfect Capital Mobility: A General Approach to the Two-Sector Harris Todaro Model

This paper investigates the analytical implications of partially mobile capital among sectors arising in the context of the two-sector general-equilibrium Harris–Todaro (HT) model. It is shown that under partially mobile capital, unlike the case of totally mobile or immobile capital, labor growth (capital accumulation) may destabilize sectoral capital movement and lower the welfare of a small country if the agricultural rental rate is lower (higher) than the manufacturing rental rate. While the price–output response is always normal in a stable system, the Rybczynski type of factor endowment–output response requires more stringent conditions ( vis-à-vis perfectly mobile or immobile capital case).     

The Optimal Environmental Tax and Urban Unemployment in an Open Economy

This paper investigates how a rise in the urban pollution tax rate may affect urban unemployment and welfare in a small open Harris–Todaro (HT) model with intersectoral capital mobility. First, by formulating urban pollution as a dirty input in manufacturing, we find that an increase in the urban pollution tax rate can increase the level of urban unemployment even with intersectoral capital mobility. That is, the optimistic finding by Rapanos (2007 ) that environmental protection policy reduces urban unemployment in the long run does not always hold. Second, the (sub)optimal pollution tax rate under urban unemployment is higher than the Pigouvian tax rate (the marginal damage of pollution). This result opposes those of Beladi and Chao (2006 ) for a closed HT economy and that of Tsakiris et al. (2008 ) for an open HT economy with sector‐specific capital.     

A welfare economic analysis of labor market policies in the Harris–Todaro model

This paper presents a welfare economic analysis of the benefits of various labor market policies in the Harris–Todaro labor market model. The policies considered are a policy of modern sector job creation, which I call modern sector enlargement (MSENL); a policy of rural development, which I call traditional sector enrichment (TSENR); and a policy of wage limitation in the urban economy, which I call modern sector wage restraint (MSWR). First, I analyze the inequality effects of these policies. I then perform two welfare economic analyses, the first based on summary measures of labor market conditions (total labor earnings, unemployment, inequality of labor incomes, and poverty rates) and the second based on dominance analysis in the labor market, in both cases assuming that the costs are borne elsewhere. The results of the welfare analyses are compared, and it is shown that TSENR unambiguously increases welfare in the labor market using both approaches, the other policies yield ambiguous results, and no policy is unambiguously welfare-decreasing.     

Urban job creation and unemployment in LDCs: Todaro vs. Harris and Todaro

Overwhelming urban migration occurred so rapidly in many developing countries that widespread unemployment and squalid living conditions are commonplace. For many of these countries, stopping urban migration has become a major policy. Two models propose 2 different theories of urban unemployment. Todaro's short-term effects model concludes that job creation actually causes unemployment. Todaro and Harris formulated a long-term effects model in which welfare subsidies create more employment and stimulate the economy. A real solution to urban job creation would include optimal allocation of investment between the rural and labor sectors. A once and for all hiring tax would reduce replacement hiring. It is impossible to design an optimal tax subsidy package for urban unemployment unless it includes knowledge of the dynamic response of migration and unemployment to the rate of net and gross hiring of labor. If subsidy taxes are levied on the agricultural sector, the net result may be a higher rate of capital formation in the (low social return) manufacturing sector and a lower one in the agricultural sector.     

Urban Pollution,Unemployment and National Welfare in a Dualistic Economy

This paper undertakes a comparative static analysis in the Harris–Todaro (H–T) model by accommodating local pollution. Unlike in the classical H–T model where migration proceeds in response to urban–rural differences in expected earnings, we consider labor movement taking place according to the difference in utility, which is influenced by the quality of the local environment. The paradoxical result is that an improvement in pollution‐abatement technology gives rise to an increase in urban unemployment and has no effect on the workers' aggregate welfare.     

Environmental Protection and Trade Liberalization in a Small Open Dual Economy

The author investigates the conditions under which environmental protection and trade liberalization might improve urban unemployment and welfare in a small open Harris–Todaro model with polluting urban manufacturing. While a tariff reduction decreases manufacturing employment, a rise in the pollution tax rate may increase it when a dirty input is complementary to capital. Environmental protection and trade liberalization are consistent in reducing the level of urban unemployment because they lower it under the same condition. They are consistent in increasing GDP if a rise in the pollution tax rate decreases manufacturing employment. Otherwise, trade liberalization will mitigate a decrease in GDP because of environmental protection if the degree of urbanization is low and if rural technology exhibits weak diminishing returns to labor. This GDP effect plays a central role in welfare improvement.     

TOURISM AND REGIONAL IMMISERIZATION

Abstract.  This paper analyzes the consequences of tourism in rural and urban areas on regional incomes, welfare and urban unemployment using a generalized Harris Todaro model. In this model two urban and two rural goods are produced. A distinguishing characteristic of this model is that the urban non-traded good is not consumed in the rural region and, similarly, the rural non-traded good is not consumed in the urban region. The most important result we obtain is that a tourist boom in the urban region may immiserize the rural area. Hence the welfare interests of rural and urban consumers may be in conflict as a result of tourist expansion in the urban region.     

Technical progress,urban unemployment,outputs, and welfare under variable returns to scale

This paper analyzes the implications of technical progress for a small Harris–Todaro (H–T) economy under variable returns to scale (VRS). It is shown that under VRS, technical progress occurring either in the agriculture or the manufacturing may be immiserizing; the effects of technical progress on sectoral outputs, factor prices, urban unemployment, and welfare crucially depend on the signs and the relative magnitudes of sectoral elasticities of returns to scale and the employment effect; the Corden–Findlay type of ultrabiased output effect of technical progress in the constant returns to scale (CRS) H–T model carries over to the case of VRS, but with much more stringent conditions than the CRS case.     

Industrial Targeting and Non‐shiftable Capital in the Harris–Todaro Model*

This paper shows that, in the 2 × 3 sector‐specific capital Harris–Todaro model, capital growth owing to either domestic or foreign investment always enhances the welfare of the country (i.e. non‐immiserizing), and this result of non‐immiserizing foreign investment holds regardless of initial holdings of foreign capital; the policy of industrial targeting via capital investment is more effective vis‐à‐vis the (neoclassical) 2 × 2 mobile‐capital Harris–Todaro model or the Heckscher–Ohlin model; in contrast to the recent generalization by Marjit and Beladi (2003 ), capital growth cannot be immiserizing in the present model, even if it destroys the “envelope theorem.”     

Cost of policy choices: A microsimulation analysis of the impact on family welfare of unemployment and price changes

This paper calculates the welfare cost to families of an unemployment shock. Using U.S. data, we find an average annualized expected dollar equivalent welfare loss of $1,156 when the unemployment rate rises by one-percentage point. Relative to single families, the welfare loss is greater for married families and increases with education. We also estimate that a loss in purchasing power of 1.8% generates the same amount of welfare loss as a one percentage point rise in the unemployment rate. Additionally, the magnitude of the shock to purchasing power that a family is willing to endure to avoid a one percentage point increases in the aggregate unemployment rate rises with income. The results in this paper informs policy makers about the distributional implications of decisions likely to affect labor markets.     

A Behavioral Model of Unemployment,Sociotropic Concerns,and the Political Economy of Trade Policy

We present a behavioral model in which agents are concerned about the scarring effects from unemployment for themselves and others and explore the manner in which unemployment matters for trade policy. We derive three policy implications: the government has an incentive to increase employment in sectors characterized by “good jobs,” where the good job/bad job characterization depends on an industry's job creation and destruction rates; the government has an incentive to pursue this policy in a gradual fashion by channeling new and unemployed workers into the appropriate sector; and opposition to trade liberalization can be reduced by welfare state policies.     

Real option,human capital investment returns and higher educational policy

This paper incorporates the concept of real option into a modified Harris–Todaro model to investigate the relationship between higher education and unemployment rates. We found that the real option value of waiting to invest in graduate school education will decrease when the expected wage rate of labors with an undergraduate degree becomes relatively lower than that with a graduate degree. As a result, more undergraduate students will decide to go to graduate schools immediately after graduation. As the supply of labors with a graduate degree increases and the job creations fail to meet the increasing demand, those who cannot get a graduate-level job will be willing to accept job offers lower than their education level. Our modified Harris–Todaro model shows that it will lead to an increase in the number of unemployed and underemployed higher educated labors. This explains why the unemployment rates for higher educated labor are relatively high in some developed countries.     

Anti‐immigration policy in the destination country and skilled–unskilled wage inequality in a source economy with or without unemployment

This paper is aimed at theoretically examining the consequence of the anti‐immigration policy adopted in the destination country on the skilled–unskilled wage inequality in a source nation using a couple of two‐sector, specific‐factor general equilibrium models in both the presence and absence of unemployment. Emigration requires incurring some capital cost for professional skill formation on the part of every prospective emigrant that adds to the opportunity cost of emigration. The authority of the destination country determines the number of visas to be granted and hence directly controls the magnitude of skilled emigration from the source country. In the migration equilibrium, the expected skilled wage income abroad is equal to the opportunity cost of emigration. In both the presence and absence of unemployment of unskilled labor, the outcome of the policy on the wage inequality crucially hinges on both the magnitude of the fixed cost of emigration and the technological factors. In the specific‐factor Harris–Todaro model, the degree of imperfection in the unskilled labor market is an additional factor. Finally, some policy recommendations have been made for protecting the interest of the poor unskilled workforce.     

工人离职、失业波动与失业保险文献评述

失业不仅涉及失业波动的影响,还包括在职工人的离队。为减少工人搜寻过程中产生的负外部性,应降低工人的信息成本。失业保险政策的实施又降低了失业工人再就业的激励性,应确立有效的失业保险水平,实现产出与社会福利的最大化。