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The OutsidersEconomic Reform and Informal Labour in a Developing Economy$
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Sugata Marjit and Saibal Kar

Print publication date: 2011

Print ISBN-13: 9780198071495

Published to Oxford Scholarship Online: September 2012

DOI: 10.1093/acprof:oso/9780198071495.001.0001

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The Extended Heckscher-Ohlin Framework with the Informal Sector

The Extended Heckscher-Ohlin Framework with the Informal Sector

Chapter:
(p.88) 7 The Extended Heckscher-Ohlin Framework with the Informal Sector
Source:
The Outsiders
Author(s):

Sugata Marjit

Saibal Kar

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780198071495.003.0007

This chapter discusses the role of unionization in a country with a sizeable informal segment. It provides a set of examples where formal and informal sector production/service activities coexist for similar product/service categories, where labour is fully mobile, and capital as an input is classified into several specific-factor categories within and outside formal production facilities. It develops two models that are fairly appropriate representations of the true dualistic (formal–informal) production patterns in most developing countries. Using an extended 2 × 2 Heckscher–Ohlin–Samuelson structure with a formal–informal production organization for the same commodity, it is shown that a tariff cut in the import-competing sector increases both informal wages and employment under fairly reasonable assumptions.

Keywords:   informal sectors, developing countries, production, Heckscher–Ohlin–Samuelson structure, wages, employment, unionization, Stopler-Samuelson theorem, Rybczynski theorem

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