Welfare implications of technological progress with segmented factor markets

Using a Heckscher-Ohlin-Samuelson type general equilibrium framework with segmented factor markets, we show that uniform technological progress in either the unorganized or the fixed wage organized sector can improve the real income of a small, open developing economy. However, uniform productivity improvement in the unorganized sector turns out to be relatively more egalitarian since it helps the marginalized informal workers in terms of wage-earnings and employment whereas productivity take-off in the organized sector hurts them.