Characterisation of Economic Growth in Developing Economies with Informal Sector

The Stolper-Samuelson Theorem in a Wage Differential Framework

Abstract: We develop a wage differential model with a unionized and a non-unionized informal sector for a small open economy. The unionized wage rate adjusts to a cost of living index and the informal wage is market-determined. In this structure, a Stolper-Samuelson type result holds without any assumption regarding factor-intensity ranking.

Barriers to Entry and Returns to Capital in Informal Activities

Abstract: This paper investigates the patterns of capital entry barriers and capital returns in informal Micro and Small Enterprises (MSE's) using a unique micro data set seven West-African countries. The author's findings support the view of a heterogeneous informal sector that is not primarily host to subsistence activities. While an assessment of initial investment identifies some informal activities with negligible entry barriers, a notable cost of entry is associated to most activities. The authors find very heterogeneous patterns of capital returns in informal MSE's. At very low levels of capital, marginal returns are extremely high- often exceeding 70 percent per month. Above a capital stock of 150 international dollars, marginal returns are found to be relatively low at around 4 to 7 percent monthly. The authors provide some evidence that the high returns at low capital stocks reflect high risks. At the same time, most MSE's appear to be severely capital constrained.

Diffusion of innovations and labor market challenges: a multiple case study from Angola

Abstract: The purpose of this qualitative multiple case study was to gain a deeper understanding of the views of stakeholders residing within impoverished communities in Angola on rapid technology diffusion and its implication on labor market challenges within their regions. To address this gap, and consistent with the qualitative paradigm, this paper conducted methodological triangulation of the study’s multiple data sources, including semistructured interviews and archival data in the form of government labor reports, reflective field notes and archival data to establish the trustworthiness of the study’s data analysis and findings.,A gap in the literature exists between the general diffusion of technological innovations and socioeconomic development that results in an ambiguous connection between theory, academia and professional practice among sub-Saharan African countries. To inform governments in developing countries on how to effectively achieve the diffusion of innovations (DoI), this integrative literature review supports a broader qualitative multiple case study that offers insights into the views of stakeholders residing within impoverished communities in Angola, on rapid technology diffusion and its implication for labor market challenges. This overview of existing research offers a targeted knowledge base that can support future research and help promote the potential for socioeconomic development in low-income countries. By addressing the patterns of the relationship between various economic imbalances and the adoption of technology that promote the social divide, along with highlighting the importance of understanding the overall technological dualism between various social groups, promises effective policies for successful DoI in impoverished sub-Saharan African regions by evaluating its impact on local labor market challenges.,The results of this multiple case study research oversee a thematic analysis of the data collected based on the study’s multiple sources, following a cross-case analysis in which this paper synthesizes the findings of the initial thematic analysis of data to answer the study’s central research question. The multiple case study approach in this research follows the concept of replication logic discussed by Yin (2017) in which the same findings are replicated across multiple cases as similarities and differences are traced across cases, and the study results obtained in this way are deemed robust and reliable.,A potential key limitation in this study was associated to the participants’ limited experiences about the study’s central phenomenon, which if inadequate, could not have been reflective of the challenges faced and shared by the target population. This study mitigates the limitation with an observation in which a much sharper understanding of the participants’ knowledge about the topic of interest was developed. Another limitation was the sample size that could have been small and may not be representative of the entire population. This study mitigates the limitation through careful interpretation of the data and strong conclusion of results.,For practical implications, this study emphasized the importance of participative approaches to ICT implementation that if well adapted by policymakers could lead to a more contextually anchored ICT-supported poverty alleviation within different dimensions of poverty.,This study addresses an under-researched area on why innovation policy initiatives calling for technology diffusion in Angola continue to stall rather than combating labor market challenges in impoverished communities. This study brings the voices of local populations on technology diffusion in impoverished regions of Angola to the extant literature, launching the development of a body of knowledge that may point the way to a promising avenue of social change through innovation and technology diffusion.,This research is original and significant in that it addresses an under-researched area on innovation policy initiatives calling for technology diffusion in Angola that continue to stall rather than combating labor market challenges in impoverished communities. This study also makes an original contribution to Rogers’s seminal theory and concept of diffusion of innovations. The study’s results guided further research in technology adoption and innovation diffusion within Angola, a nation faced with poor human capital development and an increasing proportion of the world’s poorest people and unemployment.

Social Security for Unorganised Workers in India

Abstract: The workers in the unorganised sector in India constitute about ninety-three percent of the total workforce of the country. The unorganised sector workers in India are facing serious problems rangi...

Investment and wage gap in India: a general equilibrium analysis

Abstract: This paper aims to theoretically find out whether investments could close the formal-informal wage gap in India.,The paper builds a general equilibrium model of a developing economy with a large informal sector and a capital-intensive formal sector with sector-specific capital and incorporates endogenous demand.,With homothetic preferences, a small initial wage premium and elastic relative demand, investment in the formal sector is likely to close the wage gap, but the gap persists with non-homothetic preferences. However, investment in the informal sector is unlikely to close the wage gap with either type of preferences.,Though labour market distortions in developing economies leading to a formal-informal wage gap are well-documented in the development literature, little attention has been given to the question of whether such a gap would close over time.

A Contribution to the Theory of Economic Growth

Abstract: I. Introduction, 65. — II. A model of long-run growth, 66. — III. Possible growth patterns, 68. — IV. Examples, 73. — V. Behavior of interest and wage rates, 78. — VI. Extensions, 85. — VII. Qualifications, 91.

Economic Development with Unlimited Supplies of Labour

Abstract: Written in the classical tradition this essay attempts to determine what can be made of the classical framework in solving problems of distribution accumulation and growth first in a closed and then in an open economy. The purpose is to bring the framework of individual writers up to date in the light of modern knowledge and to see if it helps facilitate an understanding of the contemporary problems of large areas of the earth. The 1st task is to elaborate the assumption of an unlimited labor supply and by establishing that it is a useful assumption. The objective is merely to elaborate a different framework for those countries which the neoclassical (and Keynesian) assumptions do not fit. In the 1st place an unlimited supply of labor may be said to exist in those countries where population is so large relative to capital and natural resources that there are large sectors of the economy where the marginal productivity of labor is negligible zero or even negative. Several writers have drawn attention to the existence of such "disguised" unemployment in the agricultural sector. If unlimited labor is available while capital is scarce it is known from the Law of Variable Proportions that the capital should not be spread thinly over all the labor. Only so much labor should be used with capital as will reduce the marginal productivity of labor to zero. The key to the process of economic expansion is the use that is made of the capitalist surplus. In so far as this is reinvested in creating new capital the capital sector expands taking more people into capitalist employment out of the subsistence sector. The surplus is then larger still and capital formation is still greater and so the process continues until the labor surplus disappears. The central problem in the theory of economic development is to understand the process by which a community which was previously saving and investing 4 or 5% of its national income or less converts itself into an economy where voluntary saving is running at about 12-15% of national income or more. This is the crucial problem because the central fact of economic development is rapid capital accumulation (including knowledge and skills with capital). Much of the plausible explanation is that people save more because they have more to save. The model used here states that if unlimited supplies of labor are available at a constant real wage and if any part of profits is reinvested in productive capacity profits will grow continuously relative to the national income and capital formation will also grow relatively to the national income. As capitalists also create capital as a result of a net increase in the supply of money particularly bank credit it is necessary to take account of this. Governments affect the process of capital accumulation in many ways and not least by the inflations which they experience. The expansion of the capitalist sector may be stopped because the price of subsistence goods rises or because the price is not falling as fast as subsistence productivity per head is rising or because capitalist workers raise their subsistence standards.

Migration unemployment and development: a two-sector analysis.

Abstract: This study examines why rural-urban labor migration persists and is even increasing in many developing nations despite the existence of positive marginal products in agriculture and significant levels of urban unemployment. Conventional economic models have difficulty reconciling rational behavioral explanations with growing levels of urban unemployment in the absence of absolute labor redundancy in the overall economy. This paper formulates a 2-sector model of rural-urban migration which recognizes the existence of a politically determined minimum urban wage at levels substantially higher than agricultural earnings. The distinguishing feature of the model is that migration proceeds in response to urban-rural differences in expected earnings with the urban employment rate acting as an equilibrating force on such migration. The overall model is used to demonstrate 1) that given the politically determined high minimum wage the continued existence of rural-urban migration in spite of substantial urban unemployment represents an economically rational choice on the part of the individual migrants and 2) that economists standard policy recommendation of generating urban employment opportunities through the use of "shadow prices" implemented by means of wage subsidies or direct government hiring may lead to a worsening of the urban unemployment problem. Welfare implications of alternative policies associated with various programs to retain rural population are assessed under the assumption that the full wage flexibility suggested by economic theory is politically unfeasible; it is concluded that in the absence of wage flexibility an optimal policy would include both partial wage subsidies or direct government employment and measures to restrict free migration. The basic model is a 2-sector internal trade model with unemployment the 2 sectors being the permanent urban sector which specializes in production of manufactured goods and the rural which either uses all available labor to produce agricultural goods or exports part of the labor to the urban sector. It is assumed that the typical migrant retains his ties to the rural sector but the assumption is not necessary for the argument.