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This paper provides an analysis of enforcement policies applicable to formal sector in dual labor markets, using a framework with heterogeneous firms, endogenous determination of informal wage, and politically dictated enforcement strategies. Firms that operate both in the formal and informal sectors do very little to increase employment when faced with the opportunity of hiring workers in the informal labor market. Thus enforcement of labor laws and other regulations should not have aggregate employment effects, particularly when workers are productively homogeneous. For firms operating exclusively in the informal sector, the outcome is different. Such features determine the stringency of enforcement in a market characterized by firms with varying levels of productivity. For example, in the case of firms with relatively high levels of productivity, enforcement has to be stricter than in the case with relatively low productivity firms. Taxing the more productive seems to be the optimal strategy.

Global recession is likely to hit the skilled sector or the so-called white goods, white collared sector in a typical developing economy. In this paper we try to analyze the impact of such an event on informal wage as the vast majority of the workforce in the developing world is employed in the unorganized or informal sector. In particular, we demonstrate the analytical possibility that a recession in the skilled sector will actually increase real informal wage.

Emigration leads to finite changes in structure of production and sectors vanish because they cannot pay higher wages. Does emigration of one type of labor hurt the other non-emigrating type in this set up? We demonstrate various scenarios when real income of the emigrating and the non-emigrating type do not move together and in the process generalize some of the existing results in the literature. In particular emigration can lead to a drastic change in the degree of inequality depending on which sectors survive in the post-emigration scenario.

A common feature in different courts of appeal, including the Supreme Courts of different countries is inordinate delay in administration of justice. Increasing caseload per judge is often treated as the culprit and hiring more judges is a popular corrective device. Particularly, for the Supreme Court there exists an ingrained conflict regarding the time and quality-efficient administration of justice, as the judges themselves are responsible for reviewing and selecting cases for further appeal. Given this choice, the trade off between number of cases filed and quality of judgment, with constrained optimization by potential litigants and social planner has not been explored so far. We argue that contrary to popular expectations, an increase in the number of judges may raise caseload per judge. Similarly, a social planner’s decision to deepen the reach of justice may inspire more litigation from the subjects and therefore is self-defeating in practice.

Studies on formal-informal interactions in the labor markets of developing countries claim that economic reform increases the level of informal activity. Although the extent of such claims differs across countries, it is generally believed that reform is likely to depress informal wage by contracting the formal sector and driving labor onto its informal counterpart. However, available empirical evidence suggests that real wage and real fixed assets in the informal manufacturing sector have risen significantly across most states in post-liberalization India. Using this as a benchmark, we formalize a general equilibrium model of inter-sectoral capital mobility and informal wage to argue that, with limited degree of capital mobility, trade reform reduces the informal wage. This is the conventional wisdom usually obtained under a partial equilibrium framework. However, with increased mobility of capital this result is reversed. We offer detailed empirical evidence on the movements of real wage in the informal sector in India and how this affects poverty at the state level. The basic result on income mobility is corroborated by a primary survey in the province of West Bengal, for which we offer descriptive analysis on household income levels in the province's informal manufacturing and service sectors.