Informal Wage and Formal Sector Productivity

Posted: 19 Aug 2008

See all articles by Sugata Marjit

Sugata Marjit

Indian Institute of Foreign Trade; Centre for Studies in Social Sciences, Calcutta; City University of Hong Kong (CityUHK) - Department of Economics & Finance

Dibyendu Maiti

Indian Institute of Engineering Science and Technology, Shibpur

Date Written: August 17, 2008

Abstract

The paper attempts to find out the relationship between informal wage and innovative efforts of firms in the formal sector in countries such as India, where informal sector captures lion's share of total workforce. A firm employs both formal and informal workers to produce a good. In equilibrium both in-house production and outsourcing are opted for. We show that the availability of low wage informal workers makes the formal segment less efficient by reducing its incentive for R and D. Thus countries with vast segment of lowly paid informal workers will also exhibit lowly productive formal sector workers.

Note: Downloadable document is in Portuguese.

Keywords: Informal Wage, Poverty, Labour Productivity, R&D Investment, Outsourcing

JEL Classification: D23, E26, J24, J42, L24

Suggested Citation

Marjit, Sugata and Maiti, Dibyendu, Informal Wage and Formal Sector Productivity (August 17, 2008). Available at SSRN: https://ssrn.com/abstract=1232282 or http://dx.doi.org/10.2139/ssrn.1232282

Sugata Marjit

Indian Institute of Foreign Trade ( email )

New Delhi
QUTUB INSTITUTIONAL AREA
NEW DELHI, 110016
India

Centre for Studies in Social Sciences, Calcutta ( email )

R 1, B.P. Township
Kolkata, West Bengal, India
Kolkata, West Bengal 700094
India

City University of Hong Kong (CityUHK) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Dibyendu Maiti (Contact Author)

Indian Institute of Engineering Science and Technology, Shibpur ( email )

P.O. - Botanic Garden, Howrah
West Bengal, 711103
India

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