Labor Markets and Institutions in Economic Development
New developments in development in the 1980's contravened several widely held tenets about how labor markets and other institutional arrangements affect the performance of low-income countries. If you believe that massive urban-rural earnings differentials due to bias plague Developia, new evidence will ease your concerns: urban workers suffered mightily in the lost-growth decade in many countries. If you fear that government or union interventions in labor markets impede stabilization or structural adjustment, think again: countries with diverse interventions reduced real wages under the gun of economic crisis. If you believe that clear property rules and privatization are necessary for rational economic behavior and transition to a market economy, the decade's growth success, China, should challenge your priors. If you fear that industrial policy is the road to disaster, state interventions in Taiwan, Korea, and Singapore tell a different story. Finally, if you think that military dictatorships that suppress labor necessarily produce high income inequality, the income distributions of Korea and Taiwan should give you pause. These emerging patterns and facts run so counter to conventional views on development as to raise major doubts about the depth of our knowledge and the extent to which narrow perfect competition or political economy perspectives illuminate the growth process.
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