Product Market Imperfection and the Two-sector Harris-Todaro Economy

This paper examines the ramifications of market imperfection for a dual economy in the context of the two-sector HarrisTodaro model with the agricultural (manufacturing) sector under perfect competition (monopoly). Based on a utility function of constant elasticity of substitution variety, it demonstrates (i) existence of a unique equilibrium at which the consumer price ratio and the producer price ratio are synchronized; (ii) several fundamental properties of the model (crucial to extended research on this subject area); (iii) contrary to an earlier result obtained under an oligopolistic manufacturing sector, trade liberalization for a small economy may be immiserizing.