Raising wages in the controlled sector: A general equilibrium analysis

The likelihood of the possibility pointed out by Stewart and Weeks, that a rise in wages in the ‘controlled’ sector of an underdeveloped country might raise total employment, is reexamined using an alternative model which facilitates consideration of the impact of such a wage rise on output and potential welfare as well as on employment. It is argued that Stewart and Weeks may have been overly sanguine in their appraisal of the impact of a controlled sector wage rise: the impact of this on real income and employment looks more likely to be adverse than not.