Unemployment in LDCs: Worker heterogeneity, screening, and quantity constraints (original) (raw)
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Skilled-Unskilled Wage Inequality and Urban Unemployment
Economic Inquiry, 2010
The impact of trade liberalization on the labor market in the North has drawn tremendous attention in the face of the growing skilled-unskilled wage gap but in the South it has been somewhat neglected. 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. We introduce this feature in the structure of a simple general equilibrium model to analyze the effects of trade liberalization and fragmentation on employment and the skilled-unskilled wage differential in the South. In particular, we show that while fragmentation necessarily improves the unskilled wage and the skilled wage, more lucrative global opportunities for the skilled final product, in the absence of fragmentation, can reduce the rural wage and increase urban unemployment. The effect of fragmentation, ceteris paribus, on the skilled-unskilled wage gap is sensitive to the degree of substitutability between land and unskilled labor. As such, fragmentation can magnify the increase in the skilled-unskilled wage gap resulting from an improvement in the terms of trade. It is also shown that a technological progress in the intermediate goods sector increases the skilled-unskilled wage gap and raises urban unemployment. (JEL F1, O1, F11, F12) *We wish to thank anonymous referee(s) for insightful comments and suggestions on an earlier version of this paper. The usual disclaimer applies.
Wage Bargaining, Public Policies and Underemployment of Educated Workers in LDCs -Version II
RePEc: Research Papers in Economics, 1991
The purpose of this paper is to investigate the effects of changes in public policies on the employment of unionised educated labour and on economic welfare in terms of a theoretical model. The background is the large and growing body of unemployed educated labour in the less developed countries (LDCs) (For a discussion of this kind of unemployment see Blang (1973). A survey of related problems for LDCs may be found in Edwards and Todaro (1974).) Frequently, an educated worker, if unable to find employment as such, would work at an unskilled job. It is this type of underemployment (or disguised unemployment) that is our main interest in this paper. * This paper has benefited from detailed comments and suggestions from Professor Ian McDonald of Melbourne University. We are also grateful to Professor Mike Burns the joint editor and an anonymous referee. None of the above are, however, responsible for any remaining shortcomings. 94 'Consequently, we use the terms "educated", "skilled" and "unionised" interchangeably throughout this paper. 2We look for welfare-increasing, rather than "free-lunch", policies. The distinction between the two is that a free-lunch policy, by definition, increases income (without having adverse effects in other directions) while a policy may increase welfare by affecting any of the arguments of the welfare function in a desired direction. 96 AUSTRALIAN ECONOMIC PAPERS JUNE analysed. However, we add to the labour market the commodity and the money markets to obtain a macromodel. The findings of our discussion are as follows: Let tl, t2, t3, denote the tax rates applicable to unskilled workers, skilled workers and employers respectively. Let s1 and s2 be educational and employment subsidies (in real terms). Let M and G denote the supply of money and government expenditure. Let r be the rate of interest. 1) The effect of a cut in t2 on the wage rate for educated workers is ambiguous. (Thus, the principal mechanism through which a tax cut raises employment and output in the early 1980s literature is absent here.)3 2) Yet, as in the earlier literature, changes in M and G (other than s1 and s2) cannot affect output. The only policies that can affect it are taxes and subsidies. 3) However, this broad general similarity conceals several differences. All tax rate changes do not affect employment and output in the same direction.
WAGE BARGAINING, PUBLIC POLICIES AND UNDEREMPLOYMENT OF EDUCATED WORKERS IN LDCs*
Australian Economic Papers, 1992
The purpose of this paper is to investigate the effects of changes in public policies on the employment of unionised educated labour and on economic welfare in terms of a theoretical model. The background is the large and growing body of unemployed educated labour in the less developed countries (LDCs) (For a discussion of this kind of unemployment see Blang (1973). A survey of related problems for LDCs may be found in Edwards and Todaro (1974).) Frequently, an educated worker, if unable to find employment as such, would work at an unskilled job. It is this type of underemployment (or disguised unemployment) that is our main interest in this paper. * This paper has benefited from detailed comments and suggestions from Professor Ian McDonald of Melbourne University. We are also grateful to Professor Mike Burns the joint editor and an anonymous referee. None of the above are, however, responsible for any remaining shortcomings. 94 'Consequently, we use the terms "educated", "skilled" and "unionised" interchangeably throughout this paper. 2We look for welfare-increasing, rather than "free-lunch", policies. The distinction between the two is that a free-lunch policy, by definition, increases income (without having adverse effects in other directions) while a policy may increase welfare by affecting any of the arguments of the welfare function in a desired direction. 96 AUSTRALIAN ECONOMIC PAPERS JUNE analysed. However, we add to the labour market the commodity and the money markets to obtain a macromodel. The findings of our discussion are as follows: Let tl, t2, t3, denote the tax rates applicable to unskilled workers, skilled workers and employers respectively. Let s1 and s2 be educational and employment subsidies (in real terms). Let M and G denote the supply of money and government expenditure. Let r be the rate of interest. 1) The effect of a cut in t2 on the wage rate for educated workers is ambiguous. (Thus, the principal mechanism through which a tax cut raises employment and output in the early 1980s literature is absent here.)3 2) Yet, as in the earlier literature, changes in M and G (other than s1 and s2) cannot affect output. The only policies that can affect it are taxes and subsidies. 3) However, this broad general similarity conceals several differences. All tax rate changes do not affect employment and output in the same direction.
The developing countries face peculiar problems which include growing magnitude of educated unemployed. Present study examines the structure and nature of educated unemployed in India, The study to analyze unemployment amongst various education levels, as also employment in non-farm sector of educated and gendered effects in occupational structure of employment. The study envisages the scope of further employment in non-farm sectors of these populace groups. It is observed that a good number of illiterates, those educated up to middle, and even those educated beyond secondary level resort to doing agricultural and allied activities. Nonetheless, the percentage engaged in agricultural and allied jobs reduces substantially as the education level goes up from 'uneducated' to that of 'secondary and more educated' levels. The participation of females is more or less limited to low paid casual type.