Capacity Utilization, Income Distribution, and the Urban Informal Sector: An Open-Economy Model
Year: 2022
Type: preprint
Abstract: Developing economies worldwide have experienced rapid informal sector expansion in response to formal sector unemployment. However, the macroeconomic effects of formal-informal sector dualism have been widely overlooked. This paper develops a two-sector, structuralist, macroeconomic model to analyze the impact of urban informal sector activity on export-led growth policy. The model uses stylized facts from the Johannesburg informal sector and is applicable to countries where informal sector production is concentrated in low-wage goods and commercial services. The paper finds that trade-offs between capacity utilization and reduced income inequality could be magnified when the existence of an urban informal sector is incorporated.
DOI: 10.7275/1274481
Author: Schaefer, Kendall K.
Institution: University of Massachusetts Amherst
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1515820853