We consider a small open Harris-Todaro (1970) econmy with special emphasis on informal sector and open urban unemployment.The simultaneous existence of informal sector and urban unemployment is explained in terms of efficiency-wage relation. We examine the efficacy of subsidy policy to the urban...

Fields (1989) has shown that in a two sector model with fixed rural wage rate an increased jobsearch efficiency from the rural sector lowers urban unemployment. The present paper reexamines the Fields (1989) proposition in a Harris-Todaro (1970) set-up with fixed and variable capital. My...