Imperfect Labor Mobility and Unemployment in LDCs

The role played by imperfect labor mobility in a Harris-Todaro (1970) type economy is investigated. Imperfect labor mobility in the H-T model of urban unemployment caused by sector specific sticky wages is introduced, and the effects of growth and policy-induced price changes on employment and output are investigated. The main implication is that while perfect labor mobility assumption serves as a sufficient condition for the validity of the conventional results in the H-T model, it is not a necessary condition for the same. Imperfect labor mobility is a stylized fact in less developed countries. Consequently, the policy implications that follow from perfect factor mobility assumption are likely to be too strong to be consistent with reality.