a general equilibrium analysis of production subsidy in a harris todaro developing economy an application to india since 1950s india has advocated import substituting industrialization policies to promote its manufacturing sector the end result was creation of a dual economy highly favored manufacturing sector with high and rigid wages and neglected agricultural sector with low wages and poverty because of the higher wages in the manufacturing sector the rural laborers migrate to the urban sector a typical characteristic of the harris todaro developing economy realizing this crisis the indian government recently initiated policies to boost agricultural production to curb the labor migration and improve the welfare of the rural population in this study we develop a computable general equilibrium cge model for india by incorporating harris todaro economic characteristics of unemployment labor migration farm dependant population and labor intensive agriculture we use the model to analyze the effects of agricultural production subsidy policies on employment factor price output price output levels and we

productivity in swedish electricity retail distribution this paper examines productivity growth in electricity retail distribution in sweden in a multiple output multiple input framework the approach used is nonparametric data envelopment analysis dea productivity is measured by means of the malmquist index productivity comparisons are made between different types of ownership and between different service areas the study indicates a high rate of productivity growth due to economies of density when measured over a period of 17 years the results show no significant differences in productivity growth between different types of ownership or economic organization

the quality effect does financial liberalization improve the allocation of capital abstract we document evidence of a quality effect of financial liberalization on allocative efficiency as measured by dispersion in tobin s q across firms we predict that financial liberalization by equalizing access to credit is associated with reduced variation in expected marginal returns we test this prediction using a new financial liberalization index and firm level data for five emerging markets india jordan korea malaysia and thailand we find robust evidence that financial liberalization rather than financial deepening is associated with improved allocative efficiency

capital markets and urban unemployment in this paper we investigate conditions under which reductions in distortions in one market improve national welfare despite the presence of distortions in another market the specific distortions we study are a differential between capital rentals and a rigid urban wage we also introduce a diagrammatic technique which may find use in the analysis of other problems

optimal trade policies for a developing country under uncertainty abstract this paper investigates optimal trade policies for a developing small open economy which faces international price uncertainty trade taxes are used to finance provision of a public good which enters the utility function of consumers if demands for private goods are independent of the public good the optimal composite tariff dominates the optimal quota if the optimal state contingent tariff increases with the foreign price the optimal specific tariff also dominates the optimal quota regardless of risk aversion however the ranking of the optimal specific tariff and the optimal quota generally depends on risk attitudes as well as ordinal preferences

credible commitment and success with public enterprise reform abstract this paper studies why some efforts at public enterprise reform fail and why others succeed economic reforms are intended to increase efficiency and thus help sustain long term growth yet many governments have had difficulty sustaining the reforms they initiated and have reintroduced rigid controls over markets and enterprises this is because either in the process of implementation the government discovers that the costs of carrying the reform further are greater than the expected efficiency gains or the public is skeptical that the new policies can be sustained and does not take the actions necessary for the gains to be realized this paper develops a new institutionalist framework and employs various measures of policy commitment and net gain from continued reform to analyze these issues the paper suggests ways in which the potential success or failure of a reform can be assessed with implications for the steps that reformers might take to increase the chances of success

foreign capital and the contractionary impact of currency devaluation with an application to jamaica abstract this paper analyses the effects of currency devaluation in a small open economy host to foreign capital using a short run macroeconomic model of the krugman taylor 1978 type it is shown that the presence of foreign capital provides devaluation with an additional contractionary mechanism besides those already identified in the literature the mechanism has its basis on the redistribution of income from wages to profits creasted by devaluation which raises the foreign component of domestic income and tends to reduce gnp and gdp the role of taxation policy in this context is examined finally estimates of the relevant effects are offered for jamaica a small mineral exporter showing that an expansionary effect of devaluation must rely on a relatively high value of the supply elasticity of non mineral exports

why haven t developing countries privatized deeper and faster abstract despite a decade of privatization in the developing world the vast majority of state owned enterprise soe assets continue to be in government hands bureaucrats in business world bank 1995 correctly identifies politics as one reason for the slow pace of privatization but it underestimates the role of institutional and economic constraints success stories of privitization are rare in low income countries and the long term promise of privatization in sectors posing regulatory complications remains to be established countries in crisis may reform soes quickly and deeply despite these uncertainties but others may opt for gradual reform which need not be altogether bad if speedy privatization results in poorly conceived schemes the cure can be worse than the illness finally bureaucrats are likely to stay in business for years to come and therefore it is important to improve their effectiveness in the roles they are unlikely to shed in the future a market friendly approach to soe reform need not be government un friendly

a model of efficiency wages as a signal of firm value we consider performance contracts with firm private information the verifiable components of the contract an up front wage and employment may serve both as a signal and a performance incentive job rent may be necessary for signaling and since efficient signaling is multidimensional there is an inextricable link between job rent and underemployment signaling can explain the lack of explicit bonding in actuality though our basic model is static our underemployment result is not a consequence of firm myopia when the firm is farsighted it will not maximize the joint future surplus if it cannot extract the worker s share at present copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the backward incidence of pollution control a dual approach abstract the backward incidence of pollution control is reexamined using the techniques of duality theory the simple geometry used establishes the results and clarifies them without the complicated mathematical manipulations required in earlier works thereby making the material more attractive for classroom presentation

the proper scope of government theory and an application to prisons when should a government provide a service in house and when should it contract out provision we develop a model in which the provider can invest in improving the quality of service or reducing cost if contracts are incomplete the private provider has a stronger incentive to engage in both quality improvement and cost reduction than a government employee has however the private contractor s incentive to engage in cost reduction is typically too strong because he ignores the adverse effect on noncontractible quality the model is applied to understanding the costs and benefits of prison privatization

unforeseen contingencies and incomplete contracts we scrutinize the conceptual framework commonly used in the incomplete contract literature this literature usually assumes that contractual incompleteness is due to the transaction costs of describing or of even foreseeing the possible states of nature in advance we argue however that such transaction costs need not interfere with optimal contracting i e transaction costs need not be relevant provided that agents can probabilistically forecast their possible future payoffs even if other aspects of the state of the nature cannot be forecast in other words all that is required for optimality is that agents be able to perform dynamic programming an assumption always invoked by the incomplete contract literature the foregoing optimality result holds very generally provided that parties can commit themselves not to renegotiate moreover we point out that renegotiation may be hard to reconcile with a framework that otherwise presumes perfect rationality however even if renegotiation is allowed the result still remains valid provided that parties are risk averse

determinants of privatization prices generating government revenue is a common objective in privatization this paper asks what determines privatization prices using firm level data for all 236 mexican companies privatized between 1983 and 1992 there are three main reasons why net prices auction prices net of the cost of prior restructuring measures are low averaging 54 cents per dollar of assets first privatization prices are very sensitive to the level of competition in the auction and restrictions often limited participation second the privatization process took too long and lengthier privatizations are associated with lower premiums third firm prior restructuring measures absorbed an average of 33 percent of the auction price most restructuring measures do not increase price and delay privatization further net prices would have increased by 71 cents per dollar of assets if the government had emphasized speed succeeding in divesting assets in one year less than the average and firing the ceo were the only restructuring step taken

what determines real exchange rates the nordic countries the model derived in this paper yields testable implications concerning the long run co movements of real exchange rates relative labor productivity the trade balance and terms of trade countries with relatively higher output growth trade deficits or improved terms of trade are found to have more appreciated real exchange rates with the main channel of transmission working through the relative price of nontraded goods exogenous terms of trade shocks are found to be the most important determinant of long run movements in the real exchange rate for denmark and norway while demand shocks account for most of the long run variance in the real exchange rate for finland and sweden

the leontief paradox continued or resolved cited in giancarlo gandolfo s textbook international economics i the pure theory of international trade springer verlag 1995 abstract currently unavailable this abstract was borrowed from another version of this item

a dynamic migration model with uncertainty we study a dynamic version of the harris todaro migration model where a finite population of infinitely lived bayesian agents choose consumption and migration decision rules as a function of their histories the agents do not know the production functions in the two sectors and learn about them through wage draws that they receive from the stochastic production functions the government knows the true production functions but is uninformed about the agents beliefs and the actual wage draws they observe the government maximizes its welfare function using wage subsidies in the two sectors and a migration tax we solve the agents dynamic programming problem and then use the solution to solve the government s dynamic programming problem we study the effects of government policies on the population distribution and illustrate the model by numerically solving a particular parametric example

trade policies and welfare in a harris todaro economy in many developing countries rising unemployment is often attributed to increases in foreign imports triggered by declining foreign prices of imports to correct the chronic unemployment problem some developing countries chose an import substitution strategy by shutting off imports whereas others adopted an outward oriented policy by promoting exports north american free trade agreement nafta was favored by mexico but opposed by organized labor in this country because it was feared that nafta may increase unemployment in the u s which of these policies is more effective in reducing unemployment and raising domestic income protection has been ardently supported as a practical cure for unemployment in chile and argentina and many other ldcs in latin america similarly india adopted import substitution strategies behind high protection and a considerable bias against exports 1 the literature has also justified the use of tariffs for small countries under uncertainty and unemployment 10 9 but in general protection distorts the trade pattern and magnify the extent of the leontief paradox by limiting imports of capital intensive products into these developing countries that suffer from high labor unemployment 7 in the literature there have been two types of models that analyze trade problems in the presence of unemployment the generalized unemployment models have been developed by brecher 5 6 and batra and seth 3 2 in these models wage rigidity is ubiquitous and unemployment exists in all sectors and they are appropriate to analyze the impact of trade policies on unemployment in developed economies the harris todaro ht hereafter model 13 on the other hand assumes sector specific wage rigidity and permits unemployment only in the urban sector thus the ht model is appropriate for investigating the impacts of trade policies of ldcs that suffer

migration theories and evidence an assessment abstract this paper presents a critical survey of theories of migration their welfare and policy implications and their empirical relevance we also develop some extensions to the theory beginning with the harris and todaro ht model in particular the ht model is extended to examine risk averse behaviour within families where the migration of members of families serves to diversify risk the welfare implications of the individual migration decision and government intervention in the form of employment subsidies are examined recent evidence on international migration is presented it is shown that migration does not flow automatically in response to wage differentials characteristics of migrants and the process of self selection are found to be important determinants of the rate of migration

monetary policy and exchange market pressure evidence from sub saharan africa the purpose of this study was to assess the impact of monetary policy on foreign exchange market pressure emp in developing country contexts for some selected countries in sub saharan africa ssa and to measure the ability of monetary policy to significantly address currency pressures that arise from trading on the global market this study was motivated by the fact that most of the ssa countries are developing economies that have negative net export positions and stand to lose significantly from consistently deteriorating foreign exchange position the study therefore employs a dynamic panel model to test the hypothesis that a tighter monetary policy stance lends strength to a currency and vice versa using 20 ssa economies for the period from 1991 to 2010 this study finds a negative and significant relationship between monetary policy and emp implying an easing of emp in the face of contractionary monetary policy the findings also point to significant relations between aggregate output levels o

privatization and employment a study of the jute industry in bangladesh this paper analyzes the effect of privatization upon employment in the bangladeshi jute textile industry privatization was partia and the selection of mills which were privatized was not based on current economic performance this provides us with a panel data set which permits reliable estimates of the effects of ownership on employment and output privatization has reduced employment of all categories of permanent workers significantly but the extent of employment reduction has been substantially greater among clerical workers and managers as compared to manual workers this implies that public sector excess employment benefited white collar workers who were both better off and better educated and suggests that public sector behaviour was clientelist rather than welfarist

exchange market pressure and primary commodity exporting emerging markets this paper studies short term sensitivity between exchange market pressure and various domestic and external factors in primary commodity exporting emerging markets the paper focuses on the top co

tax on foreign capital income and wage subsidy to the urban sector in the harris todaro model abstract we consider endogenous foreign capital inflow in the different versions of harris todaro model wage subsidies are financed by taxing the foreign capital income which is otherwise repatriated their effects on unemployment and national income are analysed

pattern of trade between underemployed economies in this paper the authors analyze the factors determining the pattern of trade between underemployed economies they find among other things that a low wage land abundant country exports the land using labor intensive product to a high wage capital abundant country the authors also find conditions under which a high wage capital rich country may export the labor intensive product the leonteif paradox copyright 1990 by the london school of economics and political science

internal migration and urban employment comment recently in this journal william e cole and richard d sanders 1985 criticized the todaro migration model and offered a different approach a lively and interesting debate followed but the cole and sanders cs model was not actually solved indeed michael todaro suggested that the model yielded no unique algebraic solution a charge to which cs did not respond this one page note identifies the changes needed to provide closure of the cs model excerpt

urban rural structural adjustment urban unemployment with traded and non traded goods abstract this paper extends the harris todaro model to include non traded goods and to analyze structural adjustment in ldcs we assume that the urban region produces two goods a manufactured good and an urban non traded good and the rural region also produces two commodities an agricultural and a rural non traded good our results reveal an asymmetry in the behaviour of the urban and rural regions in response to parametric changes or external shocks the effects of such changes on the endogenous urban variables are completely determinate however the responses of the endogenous variables in the rural region are ambiguous a deterioration in the terms of trade increases the relative price of the urban non traded good and increases its output at the expense of the urban traded good thus structural adjustment in urban and rural areas may be in opposite directions non regional models of structural adjustment ignore the possibility of having opposite effects in the urban and rural areas our results also provide a generalization of the dutch disease type phenomenon to a model with migration and unemployment

institutions and government controls abstract this paper develops a model of government policy toward industrial control and regulation that sheds light on the determinants of differential country experiences in terms of organizational arrangement and enterprise performance in contrast to the model developed by shleifer and vishny shleifer a vishny r w 1994 politicians and firms quarterly journal of economics 109 995 1025 shleifer a vishny r w 1998 the grabbing hand government pathologies and their cures harvard univ press cambridge ma which suggests that government controls over firms come about when politicians can use public funds to buyoff the managers and solicit their cooperation in politically motivated redistribution of rents the present shows that it may be the ability to use the government s regulatory powers at discretion that encourages politicians to impose controls on firms and redistribute their rents the model implies that the politicians appetite for intervention tends to be greater when the cost of collecting and using public funds is higher which is the opposite of what the shleifer vishny model predicts the present model helps explain the puzzling observation that countries with poor institutions are more likely to impose extensive controls on production and maintain large and inefficient public sectors the model also sheds light on a variety of other stylized facts and puzzles and offers new hypotheses to be tested

recent experience with commercial bank debt reduction has the menu outdone the market abstract debt reduction at market terms has been criticized as too expensive from the point of view of the debtor the recent reduction agreements following the menu approach are partially concerted but they also possess some elements of voluntariness this raises two issues a what is the conceptual justification for such financial arrangements and b based on recent evidence to what extent have these arrangements reduced the cost of debt reduction in a review of six recent menu driven debt reduction agreements we find that the debtors achieved a far better financial result than would have been feasible with simple market buybacks

privatization in africa an appraisal abstract in spite of spirited efforts over a decade only a few african countries can boast of any appreciable success in the privatization and or reform of state owned enterprises soes this paper argues that previous studies have not paid adequate attention to identifying and addressing the factors that affect the outcome of privatization and or soe reforms in africa after highlighting some flaws in these studies the paper focuses on the absence of the prerequisites for successful soe reform it then suggests policy issues that need to be addressed first and the role of interested parties including the multilateral and bilateral financial institutions in enhancing the success of soe reform efforts in africa

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

unemployment and the backward incidence of pollution control abstract this paper reexamines the backward incidence of pollution control using duality theory for a two sector general equilibrium model in which the economy experiences large scale unemployment and perfect capital mobility with a sector specific rigid wage in the polluting sector in this context it is shown that with stricter pollution controls the wage rate in the nonpolluting sector rises while the common rental rate falls in addition stricter pollution controls are shown to have an uncertain impact on national income

on the dynamic instability of induced migration unemployment in a dual economy abstract previous attempts to integrate the todarian analysis of rural urban migration with the dual economy growth model have relied upon an essentially static version of the migration hypothesis inappropriate in a growth context in this paper it is shown that when a dynamic version of the hypothesis is used the steady state growth equilibrium whilst characterised by a positive unemployment rate typical of todarian models is unstable these results have policy implications which differ from those presented in the previous literature

increasing returns urban unemployment and international capital mobility a trade policy analysis abstract this paper compares the effects of tariffs quotas and ver both with and without international capital mobility for a small open economy facing urban unemployment of unskilled labor and external increasing returns in the manufacturing sector expressions for the shadow price of foreign exchange and capital are derived under each type of trade restriction it is shown that international capital mobility in such an economy unambiguously lowers the welfare cost of all forms of trade restriction in contrast to the existing literature on full employment crs economy where international capital mobility unambiguously raises the welfare cost of tariff protection

bureaucratic structure and bureaucratic performance in less developed countries abstract we argue that several easily identifiable structural features constitute the key ingredients of effective state bureaucracies and should help to predict ratings of bureaucratic performance competitive salaries internal promotion and career stability and meritocratic recruitment we collect a new dataset on these features for bureaucracies of 35 less developed countries controlling for country income level of education and ethnolinguistic diversity we find that our measure of meritocratic recruitment is a statistically significant determinant of ratings supplied by two of three country risk agencies the importance of competitive salaries and internal promotion and career stability could not be clearly established

the benefits of privatization evidence from mexico critics of privatization often argue that its benefits come at a high cost to society the authors test the validity of this criticism for mexico s privatization program one of the world s largest case by case programs assessing the performance of newly privatized firms in such areas as profitability and efficiency they find that these firms quickly close the gap with their peers in the private sector their findings suggest that the firms profit gains come from productivity gains 52 percent layoffs 33 percent and higher prices 15 percent

variable returns to scale urban unemployment and welfare the proposition that free trade is superior to no trade has a classical ancestry adam smith and ricardo were amongst the first proponents of free trade samuelson 26 proved and it is held by economists today that free trade is the optimal policy in the presence of standard paretoconditions it is also generally agreed amongst economists that lower trade intervention is superior to higher trade intervention given competitive conditions in a small country these propositions do not hold however in the presence of factor market imperfections such as wage differentials in a small country and therefore production or wage subsidies improves social welfare the two models which are generally used to investigate the positive as well as normative aspects of trade theory in the presence of unemployment are the uniform real minimum wage model which is based on the assumption of general rigidity of real wage in one or two sectors of production and the sector specific minimum wage model which focuses on the phenomenon of rural urban migration in the face of large scale urban unemployment these two models are commonly utilized by trade theorists to analyze trade and unemployment specifically studies by haberler 13 johnson 16 batra and seth 3 findlay 12 and brecher 6 7 investigate the consequences of rigid factor prices for a small country whereas the normative as well as positive aspects of sector specific unemployment have been explored by harris and todaro 15 bhagwati and srinivasan 4 5 and more recently by batra and naqvi 2 das 10 and kahn 19 it has been correctly observed that the introduction of an exogenously specified real minimum wage among other things generates unorthodox results concerning unemployment and gains from trade a large body of research has also been concerned with the welfare implications of different commercial policies in the context of variable returns to scale kemp and negishi 20 have pointed out the beneficial effects of trade in the presence of variable returns to scale production subsidy and consumption taxes eaton and panagariya 11 have analyzed the question of gains from trade in the presence of variable returns to scale and in the context of pareto welfare criterion whereas choi and yu 8 have examined the welfare implications of tariffs and consumption taxes as well as the welfare rankings of these policies under variable returns to scale while panagariya and succar 25 have modified the necessary and sufficient conditions for stability under increasing returns to scale in urban sector

rent seeking under a weak institutional environment this paper investigates the role of the institutional environment on economic performance when the state intervenes to correct market failure results demonstrate that in the presence of weak institutions rent seeking plays a crucial role for achieving second best resources allocation

export share requirements and unemployment the case of quota trade restrictions such as import tariffs have been a common practice for protecting domestic import competing industries in most less developed countries ldcs foreign firms may however circumvent such protection through direct investment in the host countries this is the well known tariff jumping direct foreign investment which has been examined by brecher and diaz alejandro 7 they show that the foreign capital inflow leads to overproduction of the output of tariff protected sectors and hence results in welfare reduction recently rodrik 17 demonstrates that export share requirements when applied to the output produced by foreign capital may offset the negative effect of foreign direct investment through the contraction of tariffprotected overproduced sectors thus an increase in such a requirement may actually improve welfare this result contradicts the earlier finding of davidson matusz and kreinin 11 which is obtained from a partial equilibrium framework the existing literature on export share requirements remains deficient in two respects first the full employment models have been deployed ignoring the fact that most ldcs suffer from massive unemployment second the analysis has been confined by and large to tariff protection thereby neglecting quantitative trade restrictions e g import quotas it is noteworthy that it is quotas rather than tariffs which constitute a major constraint on imports by developing countries 2 the purpose of this paper is thus to remedy these two shortcomings by developing a sectorspecific unemployment general equilibrium model with quota restrictions on imports as noted by richardson 16 export performance requirements operate in a second best environment import

migration equilibrium with price rigidity the harris and todaro model revisited abstract the classical harris todaro model may be viewed as explaining the formation of supply in a dual economy hence as definining a partial equilibrium the aim of this paper is to build a general equilibrium model with migration possibilities where all the agents have explicit maximizing behaviour assumptions on wage price rigidities allow consideration of various supply demand configurations one of the most interesting results is that policy recommendations derived from the usual harris todaro model are not valid when excess supply prevails

wage subsidies and distortionary taxes in a mobile capital harris todaro model in prescribing policy to eliminate or mitigate the effects of labour market distortions some form of wage subsidy is usually among the highest ranking options rarely is the source of revenues for these subsidies treated as an explicit issue this omission has special significance for the harris todaro h t model of the labour market since the policy most frequently recommended whether capital is sector specific or intersectorally mobile is an across the board wage subsidy 2 this effectively eliminates the possibility of taxing one subset of sectors rather than subsidizing its complement an option often favoured by those theorists who concern themselves with revenue considerations the next section of this paper sets forth the model of a small open h t economy with mobile capital that is the basis for this analysis section ii re examines three wage subsidies on manufacturing wages on agricultural wages or on both sectors assuming that resources for the subsidies are raised by an across the board tax on profits this is in the tradition of cordenfindlay and we replicate their results though stating them in more precise form so that we might have a standard for later comparison the subsequent sections examine the effects of these subsidies on unemployment and resource allocation if they are financed by a tax on profits in the manufacturing sector section iii or by import tariffs section iv owing to the second best nature of the h t model it will be demonstrated that taxes normally considered distortionary in their own right can be superior to an across the board tax if revenues are constrained and can be very useful instruments if it is the variety of policy tools that is limited section v concludes with a ranking of the various subsidy tax packages

factor immobility and gains from trade the implications of imperfect factor mobility have been studied by for example batra 1 ch 10 mussa 10 grossman 7 hill and mendez 8 and casas 4 among others this factorimmobility literature has generated many interesting results in the neo classical trade theory the issue of gains from trade has been studied by batra 1 ch 4 eaton and panagariya 6 choi and yu 5 and batra and naqvi 2 the implications of imperfect factor mobility for gains from trade remain by and large unexplored the main purpose of this paper is to explore the implications of factor immobility for several gains from trade and optimal policy issues a special feature of the present paper involves an endogenously determined wage differential arising from factor immobility however the wage distortion is not a genuine distortion as the social welfare depends upon workers locational preferences in addition to consumer demands the paper is developed as follows section ii describes the model and its assumptions section iii presents the analysis regarding the optimality of free trade free trade vs no trade and the optimal policies section iv shows the welfare effects of protection measures section v offers the concluding remarks

capital markets urban unemployment and land abstract this paper shows that the remarkable result by khan and naqvi that a reduction in the capital rental differential always improves welfare despite the presence of a rigid urban wage can be obtained only for the 2 2 harris todaro model in an extended harris todaro framework incorporating a third specific factor a decrease in a distortion may not necessarily be welfare improving

public versus regulated private enterprise a comparison of public enterprise with regulated private enterprise shows that the efficiencies of privatization stem from the insulation it brings from arbitrary political and self serving influences the critical insulation springs from the costliness of interventions when there is a regulatory compact in place that protects private property from expropriation while it also corrects for market failures that same insulation means that public enteprise is a better form of organization for activities that call for a response to public interest exigencies which cannot be specified in advance or reliably adjudicated after the fact the analysis emphasizes that an appropriate regulatory compact requires institutional support international organizations that seek to implement privatization should consider promoting credible regulatory commitment by requiring countries to execute explicit regulatory compacts and by bringing to bear the weight of their continuing relationship as a means of motivating the countries to conform to such strictures

incidence analysis of financing unemployment benefits in a partially unionized economy the incidence of unemployment benefits are analysed under alternative financing modes in a two sector general equilibrium model with a segmented labour market where one sector is unionized and queue unemployment exists specific tax incidence as well as balanced budget incidence are analysed the main results are i the distributional effects are identical irrespective of which factor is taxed in the union sector ii the distributional effects are also identical irrespective of which factor is taxed in the non union sector and iii labour gains by a uniform ui tax on capital in both sectors and may or may not gain from a uniform labour tax while capital owners lose in both cases thus what matters for the incidence outcome is which sector and not which factor that is taxed

imperfect labor mobility and unemployment in ldcs comment in a recent paper in this journal parai and beladi 1997 henceforth pb extend the wellknown harris todaro model to consider imperfect labor mobility they find unambiguous support for protection in the case of a small open economy with unemployment and imperfect labor mobility proposition vii we show that the pb conclusion that the optimal tariff is always positive is incorrect furthermore this note contrasts pb s model with the existing literature on the open economy with unemployment we show that in the limiting case of perfect labor mobility their model does not produce results that economic intuition and the existing literature would lead us to expect we believe that their specification of the elasticity of labor mobility has no economic rationale within the context of the harris todaro framework we briefly explore a simple alternative specification

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

property rights versus public spirit ownership and efficiency of u s electric utilities prior to rate of return regulation for over a century american economists have been engaged in a vigorous theoretical and empirical debate over the economic performance of publicly owned versus privately owned electric utilities the authors review the historical debate and use micro data collected by the u s commissioner of labor in 1897 98 to construct efficiency measures based on a nonparametric frontier production function since this is prior to state rate of return regulation regulatory effects do not confound the analysis the authors find that publicly owned electric utilities were significantly more efficient than their privately owned counterparts copyright 1991 by mit press

urban unemployment and the gains from trade a welfare ranking of alternative commercial policies is constructed for the mobile capital harris todaro economy it is sh own that despite the presence of unemployment most noninterventioni st policies suggested by the competitive model of gains from trade ca rry over to the mobile capital harris todaro economy yet in contradi ction to the competitive model it is shown that all forms of trade i ntervention are not detrimental to welfare only those that reduce th e volume of trade are the export promotion policies so copiously fol lowed by developing countries are vindicated but their import substi tution policies are shown to be without justification copyright 1987 by the review of economic studies limited

a note on the stability of the harris todaro model with capital mobility the present note derives the exact stability condition for the harris todaro model with intersectoral capital mobility where land is explicitly included as a third scarce factor in agriculture while the previous study by neary states the difficulty of deriving a clear cut result in such a case this note demonstrates that if capital and land are never technologically substitutes in the agriculture production neary s condition that the urban sector is more capital abundant than the rural sector becomes a sufficient condition for local stability in an important article in this journal neary 1981 considered the stability of the harris todaro model with intersectoral capital mobility among other things neary showed that when relative commodity prices are fixed and capital and labour are subject to constant returns to scale in agriculture an unspecialized equilibrium is dynamically stable if and only if the urban sector is capital abundant relative to the rural sector however in the original work by harris and todaro 1970 the fixed availability of land is included in the agriculture production function hence strictly speaking the stability condition quoted above is not for the original harris todaro model with intersectoral capital mobility on this point neary concluded that the introduction of a third scarcefactor land in agriculture greatly complicates the analysis and makes it impossible to derive simple and clear cut results the present note argues that a definite result can be derived if the normality property of factors of production which was utilized by rader 1968 and suzuki 1985 is assumed

a theory of privatization or why bureaucrats are still in business abstract privatization is a dynamic phenomenon and changes in ownership arrangements require explanations based upon changes in background variables without movements in these variables bureaucrats are likely to stay in business even if reform would increase efficiency it is argued that changes in one such variable the cost of government finance have played a particularly significant role in trigerring privatizations and related reforms the increasing cost of government finance resulting from higher levels of general public expenditure and taxation also explains the policy sequence observed in many countries in which comprehensive ownership reform is preceded by a period of increased financial stringency for state owned enterprises soes

imported technologies urban unemployment and the north south dialogue abstract this paper extends the harris todaro model with intersectoral capital mobility to include sector specific imported technologies technologies are assumed to be embodied in imported capital goods the small economy in the south for which the model is defined can import any amount of these technologies from the north at given royalty rates we find that if the north agrees to reduce the royalty rate on the industrial technology both the level and the rate of urban unemployment would rise and the income distribution change against the wage earners whereas such a reduction for the agricultural technology would have just the opposite effects a decrease in either royalty rate would increase the national income in the south although the magnitude of the increase in income would be larger with reduced royalty rate for agricultural rather than industrial technology the policy implication is that the south should emphasize the import of agricultural technology over the industrial technology

the politics of government decision making a theory of regulatory capture the paper develops an agency theoretic approach to interest group politics and shows the following 1 the organizational response to the possibility of regulatory agency politics is to reduce the stakes interest groups have in regulation 2 the threat of producer protection leads to low powered incentive schemes for regulated firms 3 consumer politics may induce uniform pricing by a multiproduct firm 4 an interest group has more power when its interest lies in inefficient rather than efficient regulation where inefficiency is measured by the degree of informational asymmetry between the regulated industry and the political principal congress

imperfect labor mobility and unemployment in ldcs reply in a recent paper parai and beladi 1997 pb hereafter we have analyzed the implications of growth and trade policies for a small open economy facing imperfect labor mobility and unemployment of the harris todaro variety we have used the casas 1984 specification of the labor immobility phenomenon for a harris todaro type economy and have shown that most of the results in harris todaro framework remain unaltered even under imperfect labor mobility provided that the elasticity of labor mobility parameter exceeds a critical minimum value on the optimal tariff issue gilbert and mikic 1997 gm hereafter find our results counterconventional in gm s view the nonconventional result in pb is due to our simplification of the labor mobility specification given by casas in this note we offer our response to gm s comments

examining the leontief paradox in u s agricultural trade abstract factor intensity of united states agricultural trade is examined in the context of leontief s classic paradox using leontief s method as well as methods developed recently by leamer and others findings indicate that factor endowments are important determinants of u s agriculture s comparative advantage in trade as suggested by the heckscher ohlin theory

rural urban migration in economic development abstract this paper provides a review of the theoretical literature on rural urban migration in contemporary ldcs the paper begins with a brief discussion of the lewis model before going on to discuss the todaro and the harris todaro models and the large literature which these models have spawned the question of job search in the context of migration and the role of family members in migration decisions are considered next the paper then takes a closer look at the informal sector and also sets out alternative migration functions to the ones usually employed in the literature the paper concludes with a brief note on some of the important implications arising from our study

labour turnover cost and the curious properties of the mobile capital harris todaro model abstract as corden and findlay 1975 have shown the mobile capital harris todaro model has certain curious properties viz that capital accumulation unambiguously increases unemployment whereas labour force growth reduces unemployment in this paper we show that introduction of labour turnover cost in the manufacturing sector dampens the above paradoxical results on one hand and strengthens the interesting properties of the model on the other

efficiency losses from tax distortions vs government control abstract given the strong theoretical presumption that state enterprises are less efficient than private enterprises why have countries often chosen state ownership this paper explores the hypothesis that high tax rates can distort the decisions of private enterprises by enough that state ownership becomes preferable on efficiency grounds the forecast is that state ownership should be seen primarily in settings with high explicit or implicit tax distortions to private behavior

urban unemployment equilibrium in ldcs a perspective alao n 1985 urban unemployment equilibrium in ldcs a perspective reg studies 19 185 192 this paper describes the main features of the urban labour market in developing countries examines the extent to which the harris todaro model sheds light on the features described and suggests modifications which can be made to this type of model it is suggested that policies which redress the real income distribution in favour of rural areas are to be preferred to wage subsidies and that production subsidies for agriculture would have the most significant impact

instability in rural urban migration following decades of large scale rural urban migration in developing countries the authors note the recent growth in reverse migration or migration from urban centers to suburban or rural areas which suggests that the labor market adjustment process may be unstable it is our purpose here to investigate the question of stability using some recent developments in nonlinear dynamic analysis and to do so within a framework which closely resembles the original harris todaro model we find that instability is indeed a possibility and that regular or irregular nonperiodic fluctuations can be propagated even in the absence of any exogenous shocks the source of these results is the lag in adjustment on labour markets combined with the nonlinearity of the labour supply function excerpt

exchange market pressure in postwar brazil an application of the girton roper monetary model this study applies lance girton and don roper s hereafter g r monetary model of exchange market pressure to the postwar brazilian monetary experience the model was designed specifically for the canadian managed float during the period 1952 62 the object of their model is to explain what they term exchange market pressure that is the pressure on foreign exchange reserves and the exchange rate when there exists an excess of domestic money supply over money demand in a managed floating exchange rate regime the basic theoretical proposition is that any such excess supply of money can be relieved by an exchange depreciation a loss in foreign reserves or in the context of a managed float by some combination of the two in this sense the g r managed float model used here is firmly rooted in the modern monetary approach to exchange rates and the balance of payments brazil provides a particularly good example for testing this approach not only because it is in many senses a unique example of a postwar managed float system but also because it can be treated as a small open economy in the sense that world prices and monetary conditions faced by brazil are taken as given this particularly suits the purpose of most modern monetary models which make this assumption and obviates the problems of monetary dependence and neutralization dealt with in the pioneering g r paper specifically the small country assumption permits us to devise a simple one country equation of managed floating which depends upon four essential ingredients 1 money demand 2 money supply 3 purchasing power parity and 4 monetary equilibrium 2 furthermore in brazil a much greater proportion of exchange market pressure was absorbed by exchange rate depreciation than in the canadian case where changes in reserves were large relative to exchange rate movements in short postwar brazil provides a singularly good opportunity to test the monetary model of exchange market pressure section i briefly states the essential elements of the monetary model and derives the equation to be tested for the brazilian experience from 1955 to 1975 section ii reports empirical results for the exchange market pressure model and section iii examines the applicability of the relative version of purchasing power parity for the time period considered section iv summarizes the results and discusses the merits of the monetary approach in light of the brazilian experience

skilled unskilled wage inequality and urban unemployment i introduction an extensive body of literature has looked at possible effects of trade liberalization on the labor market in the north the effects on the labor market in the south have not drawn as much attention conventional wisdom associated with the stolper samuelson theorem predicts a gradual reduction of skilled unskilled wage inequality in the south however recent studies on latin american countries exhibit conflicting patterns wood 1997 summarizes the empirical findings citing a series of articles by robbins 1995a 1995b 1996a 1996b that convincingly demonstrate that latin america has experienced an increasing wage gap between the skilled and the unskilled following a more open trade and investment regime while globalization induced changes in production patterns and the consequent increase in the demand for skilled labor relative to unskilled labor has often been cited as the root cause of wage inequality there has been no general agreement over the possible source of such increased demand for skilled labor the debate among economists on this has followed two broad paths one relying on technological changes and the other on trade and investment while technological change may have played a key role in the widening wage gap in the industrialized countries there is strong evidence robbins 1994a 1994b 1995a 1995b 1996a 1996b robbins and zveglich 1995 wood 1997 indicating the dominant influence of trade and investment on wage inequality in the developing economies the implications of a more open trade and investment regime need to be analyzed in terms of frameworks that explicitly take into account the structural features of labor markets in the south one of the key structural differences between the north and the south is that the south experiences a pronounced rural urban migration in the presence of urban unemployment basu 1997 ray 1998 the goal of our paper was to capture this feature within the structure of a simple general equilibrium model in an effort to understand the effect of fragmentation on the skilled unskilled wage differential and employment in the south the rest of the paper is organized as follows the next section places this paper in the context of the relevant literature section iii describes the general equilibrium model with the possibility of fragmentation and unemployment section iv compares and contrasts the impact of trade and endowment on the skilled unskilled wage gap and employment with and without fragmentation section v concludes ii context the motivation of this paper stems from our view that the southern experience does not necessarily contradict conventional wisdom as has been claimed in wood 1997 but points to the need for parsimonious yet meaningful modifications of the structure of general equilibrium models from which the wisdom is derived to properly reflect the salient structural features of the south on the one hand production fragmentation has become an important facet of globalization in modern times 1 sharp declines in transportation and communication costs have encouraged this process of slicing the value chain that is evident in international trade data this has been sustained by various regional integration agreements that have reduced the barriers to international trade and investment as well as important technical innovations in telecommunications and information technology that have facilitated the coordination of international production networks this advanced stage in the international division of the chain of production has brought a fundamental change in the nature of international trade as goods increasingly cross multiple national borders while they are in process several authors such as jones kierzkowski and lurong 2005 wan 2005 long 2005 jones and kierzkowski 1998 jones and marjit 2001 arndt 1998 feenstra 1998 harris 1998 hummels rapoport and yi 1998 feenstra and hanson 1996b and dixit and grossman 1982 have analyzed the role of fragmentation in world trade

rural urban migration and the transition from traditional to modern agriculture abstract this article analyzes a salient feature of ldcs namely that of the coexistence of traditional and modern agricultural techniques during economic development a three sector two commodity general equilibrium model is specified and migration takes place from backward agriculture to a modern agricultural and a modern manufacturing sector the consequences on urban unemployment welfare size of the backward sector etc of general and selective labor and capital subsidies and a migration tax are clarified a labor subsidy does not under any factor intensity assumptions have an unambiguously decreasing effect on unemployment a tax on the urban labor force lowers unemployment and raises welfare

foreign capital inflows and welfare in an economy with imperfect competition abstract this paper examines the resource allocational and welfare effects of exogenous inflows of foreign capital in a general equilibrium model with oligopolistic competition and unemployment although the welfare impact for the short run is ambiguous and dependent upon the strength of excess profits and scale economies relative to unemployment in manufacturing in the long run additional inflows of foreign capital always improve national welfare with capital mobility hence attracting foreign capital remains a sound policy for economies characterized by imperfect competition scale economies and regional unemployment

on the harris todaro model with intersectoral capital mobility n b professor neary was based at trinity college dublin when this article was first published the full text of the article is not available in ora at this time citation neary j p 1981 on the harris todaro model with intersectoral capital mobility economica 48 191 219 234

predicting currency crises abstract in recent years a number of researchers have claimed success in systematically predicting which countries are more likely to suffer currency crises most notably kaminsky lizondo and reinhart 1998 this paper evaluates the klr approach to anticipating currency crises and develops and tests an alternative first we try to answer the question if we had been using the klr model in late 1996 how well armed would we have been to predict the asia crisis second we analyze a more general probit based model of predicting currency crises in the process we test several basic assumptions underlying the indicators approach

exchange market mayhem the antecedents and aftermath of speculative attacks exchange market mayhem the antecedents and aftermath of speculative attacks this paper evaluates the causes and consequences of episodes of turbulence in foreign exchange markets using data from 1959 through 1993 for twenty oecd countries we consider the antecedents and aftermath of devaluations and revaluations flotations fixings and speculative attacks which may not be successful we find that realignments of fixed exchange rates are alike devaluations are preceded by political instability budget and current account deficits and fast growth of money and prices revaluations are mirror images of devaluations speculative attacks resemble devaluations but money growth and inflation are more endemic and there is no last minute attempt to tighten monetary policy in contrast few consistent correlations link regime transitions like flotations or fixings to macroeconomic or political variables transitions between exchange rate regimes are largely idiosyncratic and are neither consistently provoked ex ante by systematic imbalances nor typically justified ex post by subsequent changes in policy we conclude that there are no clear early warning signals of many speculative attacks and no easy solutions for policy makers barry eichengreen andrew k rose and charles wyplosz

the relative efficiency of public and private firms in a regulated environment the case of u s electric utilities abstract the relative efficiency of privately owned and publicly owned electric utilities is investigated using theoretical and econometric models that allow for the effects of both ownership type and regulation the estimation results indicate that the two types of firms are equally cost inefficient in the united states the average effect of inefficiency is to increase the cost of production by 2 4 percent holding output constant inefficiency increases the average quantities demanded of capital and labor and decreases the average quantity demanded of fuel

urban unemployment and non immiserizing growth abstract one purpose of this paper is to show that in the harris todaro economy economic expansion can not be immiserizing another purpose of this paper is to examine the implications of economic expansion for urban unemployment as well as sectoral outputs for the case of non neutral technical change finally it is shown that a damaging property of the harris todaro model that capital accumulation causes unemployment to rise whereas labor growth causes it to fall is at least partially rectified by the incorporation of land as a scarce factor in the agricultural sector

the financial and operating performance of newly privatized firms evidence from developing countries this paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992 we use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures both unadjusted and market adjusted results show significant increases in profitability operating efficiency capital investment spending output employment level and dividends we also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios our results are generally robust when we partition our data into various subsamples

sector specific minimum wages economic growth and some policy implications abstract economic growth is introduced in the urban unemployment model of harris and todaro it is shown that in the steady state the optimal savings ratio is greater than the golden rule savings ratio under full employment also the optimal proportion of total investment allocated to the urban sector is not necessarily higher than the optimal proportion under full employment

on the harris todaro model with intersectoral migration of labour aspects of labor migration in developing countries are examined using the approach developed by j r harris and m p todaro in particular the author attempts to model the process of labor turnover between the urban unemployed and urban firms and between the rural sector and the urban unemployed the model includes a dynamic system of wage rates and urban unemployment rates annotation

the shadow price of foreign exchange in a dual economy abstract this paper examines the shadow price of foreign exchange for a dual economy with tariffs quotas or vers we show that the shadow exchange rate is greater than the official rate in the presence of tariffs whereas it is greater or smaller than the official rate in the presence of quotas depending upon whether capital is sector specific or perfectly mobile furthermore the shadow exchange rate is unambiguously smaller than the official rate for the ver case when capital is intersectorally mobile the rate however may be larger than the official rate when capital is sector specific the practical implications of the results for project appraisal are also discussed

optimal trade policies for a small open economoy this paper investigates optimal trade policies for a small open economy with unemployment when factor prices are rigid random foreign prices result in random unemployment of resources the ranking of second best policies is investigated if the marginal propensity to consume the importable is positive and nonincreasing in income the optimal composite tariff dominates the optimal target price which in turn dominates the optimal quota copyright 1993 by the london school of economics and political science

urban unemployment international capital mobility and development policy abstract we introduce international capital mobility into the harris todaro model and examine the effectiveness of some policy tools the main message is such that a wage subsidy in manufacturing and a tariff are no longer effective to improve welfare while a wage subsidy in agriculture remains valid under the assumption of international capital mobility this is in sharp contrast to the result obtained for the original harris todaro model

possibility or impossibility of paradoxes in the small country harris todaro framework a unifying analysis abstract in this paper we argue that the harris todaro ht framework sometimes satisfies an envelope property which makes it work like a full employment heckscher ohlin samuelson hos model then the ht structure produces very similar results as one gets in the standard hos framework differences arise because the envelope condition may break down we show how several celebrated results in the ht structure can have this reinterpretation