The intermediate sector, unemployment, and the employment - output conflict : a multi-sector model
Steel, W. | Takagi, Y.
This paper analyzes urban intermediate sector expansion as a policy alternative for labor absorption. Introduction of an intermediate sector into the Harris-Todaro framework demonstrates that the migration and unemployment responses to job creation implied by their model can be avoided. Output as well as employment effects of expanding the modern and intermediate sectors are analyzed to show that both the output-employment trade-off and the Todaro paradox stem from dual economy assumptions. The intermediate sector is distinguished from underemployment in the informal sector, and the model is extended to include both types of activities in rural as well as urban areas. Other extensions of the Harris-Todaro model are incorporated, and policy implications are discussed.
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