A Model of the Informal Sector in Development
Abstract
In discussions of economic development, industrial dualism is often ignored. Industry, or the modern sector, in developing countries is composed of an overregulated formal sector and a free‐entry informal sector. Because of the nature of the regulations we can, in general, identify the formal sector with large industry and the informal sector with small industry. The informal modern sector is often a dynamic actor in the process of economic development, frequently outpacing the growth of the formal modern sector. We investigate in a general equilibrium model the conditions under which the informal sector increases its capital stock more rapidly than the formal sector. We also look at the employment‐unemployment effects of industrial dualism.
Keywords
Citation
Gang, I.N. and Gangopadhyay, S. (1990), "A Model of the Informal Sector in Development", Journal of Economic Studies, Vol. 17 No. 5. https://doi.org/10.1108/01443589010138364
Publisher
:MCB UP Ltd
Copyright © 1990, MCB UP Limited