Optimum taxation and public production in a dynamic Harris-Todaro world

Rural–urban Migration in Economic Development

“…Using wa = Wm, it then follows that S m = S a . In other words, an equal wage subsidy to both sectors achieve point c. * Note, however, that since the solution is a universal subsidyrather than a taxcum-subsidy -it raises the problem of financing without producing countervailing distortions, and a number of recent papers have addressed themselves to the question of the source of revenues for employment subsidies in the presence of induced migration; see, among others, Heady (1987,1988) Jha and Lachler (1981). lo Another problem with the Bhagwati-Srinivasan optimal subsidy (call it, say, s*) is that a particular component of their subsidy formula is the marginal produce of labour in the optimal situation.…”

“…21. For other interesting attempts at introducing dynamics in the Harris-Todaro model, see Robertson and Wellisz (1979), Jha and Lachler (1981), Stark and Yitzhake (1982), Gupta (1984). Also see Khan (1980) for a generalization of HT model in several directions.…”

Tax policy and Human Capital Accumulation in a Ressource-Constrained Growing Dual Economy

“…On the other hand, models of economic growth in developing dual economies have typically disregarded human capital accumulation. This is true both of the traditional dual economy literature (see, e.g., Marino 1975; Amano 1980) and its Harris-Todaro variant (see, e.g., Jha and Lachler 1981). Because factors other than capital accumulation and population growth account for well over half the growth of real national income, this exclusion is especially significant.…”

“…McIntosh (1986) uses a dual economy model to analyze the benefits of northsouth trade to developing countries; Heady and Mitra (1986) use it to study the optimal mix of trade policy, tax policy, and shadow prices; Jha and Lachler (1981) and Heady (1987) use it to examine the effect of tax policy on intersectoral migration; Gang and Gangopadhyay (1987) employ such a model to study choice of technique; McMahon (1990) uses it to analyze the effects of tariff policy; Buffie (1993) employs such a model to study the impact of foreign investment on underemployment and domestic capital accumulation; and Chao and Yu (1995) use it to study the shadow price of foreign exchange. The specific variants of the model used in the preceding studies differ.…”

“…Third, to a lesser extent, there is a paucity of literature on the role of taxation in the development process. As mentioned earlier, Jha and Lachler (1981), Heady andMitra (1986), Heady (1987), and McMahon (1990) are examples of studies that deal with some aspects of tax policy. However, because human capital has been neglected in the dual economy literature, it follows that the role of taxation in helping human capital accumulation in a dual economy also has been neglected.…”