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Macroeconomic Policy, Investment, and Urban Unemployment in Less Developed Countries

Walter Haessel
American Journal of Agricultural Economics
Vol. 60, No. 1 (Feb., 1978), pp. 29-36
Stable URL: http://www.jstor.org/stable/1240158
Page Count: 8
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Macroeconomic Policy, Investment, and Urban Unemployment in Less Developed Countries
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Abstract

The two sector Harris-Todaro model, extended to include a government sector and aggregate demand, is used to analyze the effects on output, prices, and employment of policies designed to mitigate urban unemployment. An increase in aggregate demand will be inflationary even though output will increase. Government job creation will be inflationary, will stimulate manufacturing output, but may result in a decrease in agricultural output. Investment in agriculture will increase agricultural output, decrease manufacturing output, and decrease price level. Investment in manufacturing results in an increase in manufacturing output, agricultural output and employment will decline, and prices will fall.

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