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Urban unemployment, rural labor monopsony, and optimal policies

journal contribution
posted on 2000-01-01, 00:00 authored by H Beladi, Chi-Chur Chao
Using a dual-economy model with urban unemployment and rural labor monopsony, this paper shows that the first-best optimum can be achieved by different rates of wage subsidies, in which the subsidy to rural wage is adjusted upward in accordance with the amount of exploitation by rural producers. It is also shown that the policy of either import substitution or export promotion has merit, depending on whether the distortion of urban unemployment exceeds that of rural labor monopsony or not. The theoretical results obtained in this paper justify the observation of the policies adopted in many countries.

History

Journal

Japan and the world economy

Volume

12

Issue

1

Pagination

1 - 9

Publisher

Elsevier

Location

Amsterdam, The Netherlands

ISSN

0922-1425

Language

eng

Publication classification

C1.1 Refereed article in a scholarly journal

Copyright notice

2000, Elsevier Science B.V.

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