Some Aspects of Stabilisation Programme-A Superior Alternative to Devaluation

A Superior Alternative to Devaluation Ranjit Sau Devaluation has been a common feature of almost all stabilisation programmes in developing countries in recent years. Devaluation reduces the wage rate, and raises profit. This paper analyses the equilibrium of a firm in an imperfectly competitive export market It transpires that a suitably devised scheme of wage-cum-profit- sharing can promote exports, keeping the firm's profit at the initial level, but raising the worker's earning in comparison with the post-devaluation regime. In this sense the proposal has the merit of somewhat Pareto-like optimality. It has two other remarkable advantages. First, ihe package can be used so as to maximise the volume of dollar revenue; devaluation as such can never perform this feat in a wage economy Second, unlike devaluation, it has no contractionary effect on the economy.