ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Liberalisation, Unemployment and Capital Reform

Liberalisation, Unemployment and Capital Reform Ranjit Sau The finance minister has outlined a model of economic development that envisages liberalisation and globalisation of the economy. Asset distribution in India is very skewed. Using the efficiency wage theory this paper proves with simple geometry that a competitive equilibrium in an economy with highly unequal asset holding will entail involuntary unemployment of the assetless poor. Although both are competitive, the equilibrium here sharply differs from that of an Arrow-Debreu economy which presumes sufficient assets for all agents.

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