Working Paper: CEPR ID: DP4387
Authors: Jonathan Temple
Abstract: This Paper shows how to calibrate a two-sector general equilibrium model of production using a small number of parameter assumptions and readily available data. The framework is then used to analyse the costs of labour market dualism. The Paper quantifies the effects of rural-urban wage differentials and urban unemployment on aggregate productivity, wages and returns to capital, factor shares, and sectoral structure. One of the main findings is that labour market rigidities can have a major impact on the extent of industrialization.
Keywords: dualism; minimum wages; productivity; wage differentials
JEL Codes: D61; O40
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wage differentials between rural and urban sectors (J31) | inefficiencies in labor allocation (J29) |
| inefficiencies in labor allocation (J29) | aggregate TFP (E23) |
| intersectoral differentials in marginal productivity (J49) | aggregate TFP (E23) |
| intersectoral differentials in marginal productivity (J49) | output (C67) |
| labor market rigidities (J48) | industrialization (O14) |
| eliminating wage differentials (J79) | aggregate TFP (E23) |
| increasing total employment (J68) | aggregate TFP (E23) |
| labor market dualism (J42) | sectoral structure (L16) |