9. Urban Unemployment, Privatization Policy, and a Differentiated Mixed Oligopoly

In this chapter, we consider a combination of a traditional dualistic economy model with a differentiated mixed oligopoly model. As shown in Chap. 3, Harris and Todaro [7], who produced a pioneer study in the analysis of dualistic economy, describe a dualistic economy by assuming downward rigidity of wages in an urban area and explain the occurrence of unemployment endogenously. Although the Harris and Todaro model is important for the study of dualistic economy analysis, it is difficult to say that the setting necessarily accords with reality. As we have already referred in Chap. 3, the Harris and Todaro model has been extended from various viewpoints. Corden and Findlay [3] extend the Harris and Todaro model by taking account of mobile capital between regions. Calvo [2] introduces the behavior of labor unions into the Harris and Todaro model and determines the higher fixed wage in an urban area endogenously. Fukuyama and Naito [6] also introduce polluting goods into the Harris and Todaro model and analyze the effect of environmental policy on urban unemployment. Naito [10] combines a mixed duopoly with Fukuyama and Naito [6]. Although he analyzes the effect of public firm privatization on urban unemployment, Naito [10] deals not with differentiated goods but with homogeneous goods. In the real world, it is not natural to assume homogeneous goods produced in an urban area. Although Beladi and Chao [1] consider the mixed ownership of single national firm and show that the privatization can improve social welfare in the long run, they do not deal with a mixed oligopoly market.