This paper first sets out a model of a less developed country (LDC), then shows how, with minor modifications, this model can be changed to become a model of a developed country (DC) consisting of a primary and a secondary sector. Open economy features are then introduced into both the DC and LDC models. The aim is to highlight the role of the Informal sector in both developed and less developed countries and show how changes in the world economy might impinge on the Informal sector in our DC and LDC differently. It is also hoped that the development of different models in the paper may be of some pedagogical use. © 2000 Elsevier Science B.V.
- External shocks
- Informal sector