Imperfect Labor Mobility and Unemployment in LDCs: Comment

Abstract

In a recent paper in this journal, Parai and Beladi (1997; henceforth PB) extend the wellknown Harris-Todaro model to consider imperfect labor mobility. They find unambiguous support for protection in the case of a small open economy with unemployment and imperfect labor mobility (Proposition VII). We show that the PB conclusion that the optimal tariff is always positive is incorrect. Furthermore, this note contrasts PB's model with the existing literature on the open economy with unemployment. We show that in the limiting case of perfect labor mobility, their model does not produce results that economic intuition and the existing literature would lead us to expect. We believe that their specification of the elasticity of labor mobility has no economic rationale within the context of the Harris-Todaro framework. We briefly explore a simple alternative specification.