Purpose: This paper aims to theoretically find out whether investments could close the formal-informal wage gap in India. Design/methodology/approach: The paper builds a general equilibrium model of a developing economy with a large informal sector and a capital-intensive formal sector with...

The link between real and financial markets is a perennial source of debate and research in macro-finance. The issue resurfaces time and again in different forms: Does the functioning of financial systems have any effect on real activity (commodity market)? What is the possible relation between...