We re-examine the Lewis undermigration by studying a two-sector model in which there is a trade-off between higher productivity in the modern sector and better information in the traditional sector. The consequent presence of well-functioning local insurance markets in the traditional sector and...

We examine the interactions between different institutional arrangements in a general equilibrium model of a modernizing economy. There is a modern sector, where productivity is high but information asymmetries are large, and a traditional sector where productivity is low but information...

This paper models economic development as a process of institutional transformation by focusing on the interplay between agents' occupational decisions and the distribution of wealth. Because of capital market imperfections, poor agents choose working for a wage over self-employment, and wealthy...