This paper builds up a two country model of trade and unemployment allowing for perfect mobility of capital across the borders. Capital moves from the north to the south, which suffers from unemployment. A few basic policies related to lowering of unemployment are discussed. In particular it is...

An increased foreign capital inflow into a protected sector is generally immiserizing. We show that if the protected sector produces an intermediate input, positive welfare effects may emerge. A striking result is that it might lead to an increased import-demand for the intermediate input which...

We consider an economy with two groups of individuals, rich and poor. A central authority can either directly redistribute income to the poor, or allow for some degree of informality in economic activities by not enforcing property rights. The optimal degree of informality depends upon the...

This paper introduces harassment in a model of bribery and corruption. We characterize the harassment equilibrium and show that taxpayers with all possible levels of income participate in such an equilibrium. Harassment has a regressive bias. Harassment cost as such may not affect tax revenue....

In the presence of inequality a status-driven utility function reconciles the conflict between income-based and nutrition-based measures of poverty. Moreover, it can explain why the poor tend to save less, an established empirical fact in the developing countries. The result is independent of...

We provide an analysis of enforcement policies applicable to formal sector in dual labor markets. We use a framework with heterogeneous firms, endogenous determination of informal wage and politically dictated enforcement strategies. Firms which operate both in the formal and informal sectors do...