DISGUISED,URBAN UNEMPLOYMENT AND WELFARE IN A GENERAL EQUILIBRIUM MODEL WITH SEGMENTED LABOR MARKETS*

ABSTRACT This paper integrates the theory of segmented labor markets with the Ranis-Fei model of dualism to analyze two types of unemployment; disguised unemployment in the rural sector and urban unemployment. The major results obtained are (1) sector-specific accumulation in the urban area may raise unemployment and lower welfare and (2) sector-specific accumulation in the rural sector always raises welfare but increases disguised unemployment. These results highlight the importance of regional resource allocation and the role of the agricultural sector in reducing urban unemployment.