Social and Behavioral Sciences Commons^™

Integration, Informalization, And Income Inequality In Developing Countries: Some General Equilibrium Explorations In Light Of Accumulating Evidence, Arslan Razmi

Economics Department Working Paper Series

By focusing on structural features within developing economies, this paper attempts to reconcile developments observed in many post-liberalization countries with the help of modified versions of standard trade theory factor endowment models. The common thread generating most of our interesting results is the presence of sectors that are even more labor-intensive than those producing traded goods. Measures undertaken to enhance public sector efficiency and attract investment in an import-intensive export sector may increase rental-wage and skilled- unskilled wage gaps, contra the predictions of the simple Heckscher-Ohlin-Samuelson model. Moreover, increasing income inequality can exist side-by-side with informalization of the economy. The …