Poverty inequality and development in dual economics with urban informal sectors

Abstract

In this paper a general model of dualistic economies with urban informal sectors is proposed. The model is able to encompass a wide variety of distortions and institutional features which may affect such economies. Within this framework the two types of dualism, modern and traditional sector dualism, are distinguished and the implications of development patterns and productivity enhancing development policies for distribution are examined. It is show that traditional sector enrichment growth has the type of dualism present. However, Productivity enhancing development policies may have implications which lead to undesirable distributional and growth consequences even if they ostensibly promote growth in a desired target sector in a general equilibrium setting.