Glossary

asymmetric information: Information that is relevant to the parties in an economic interaction, but is known by some but not by others.
credit market excluded: A description of individuals who are unable to borrow on any terms.
decreasing returns to scale: These occur when doubling all of the inputs to a production process less than doubles the output. Also known as: diseconomies of scale.
deindustrialized: The process by which the share of the manufacturing sector in a country’s GDP as well as its workforce reduces over time.
diseconomies of scale: These occur when doubling all of the inputs to a production process less than doubles the output. Also known as: decreasing returns to scale. See also: economies of scale.
dual economy: A dual economy has two parts to it—a capitalist sector consisting of firms employing wage workers and an informal sector consisting of self-employed individuals.
economies of scale: These occur when doubling all of the inputs to a production process more than doubles the output. The shape of a firm’s long-run average cost curve depends both on returns to scale in production and the effect of scale on the prices it pays for its inputs. Also known as: increasing returns to scale. See also: diseconomies of scale.
employment rent: The economic rent a worker receives when the net value of their job exceeds the net value of their next best alternative (that is, being unemployed). Also known as: cost of job loss.
firm: Economic organization in which private owners of capital goods hire and direct labour to produce goods and services for sale on markets to make a profit.
gig economy: An economy made up of people performing services matched by means of a computer platform with those paying for the service. Workers are paid for each task they complete, and not per hour. They are not legally recognized as employees of the company that owns the platform, and typically receive few benefits from the owners, other than matching.
import substitution policies: Trade policies that attempt to substitute imported goods with domestic ones by offering tariff or quota-based protection to domestic producers.
incomplete contract: A contract that does not specify, in an enforceable way, every aspect of the exchange that affects the interests of parties to the exchange (or of others).
labour market power: A firm has labour market power (sometimes called monopsony power) if it can reduce the wage it needs to pay its workers by lowering the number of workers that it employs. See also: monopsony power.
market power: An attribute of a firm that can sell its product at a range of feasible prices, so that it can benefit by acting as a price-setter (rather than a price-taker).
monopsony power: A firm has labour market power (sometimes called monopsony power) if it can reduce the wage it needs to pay its workers by lowering the number of workers that it employs. It is sometimes called monopsony power because it applies, in particular, to a firm that is the only employer in a particular labour market.
panel dataset: A combination of cross-sectional and time series data where the unit of analysis (households, firms, countries etc) are followed over time. Panel datasets are useful because we can make comparisons between individuals and comparisons of the same individual over time.
putting out system: A system of subcontracting linkages between capitalist firms and the informal sector.
randomized controlled trials: An experimental study of the effect of an intervention (such as a new policy). Experimental subjects are randomly assigned either to a ‘treatment group’ that receives the intervention, or a ‘control group’ that does not. The effect is assessed by comparing outcomes for the two groups.
reservation wage: What an employee would get in alternative employment, or from an unemployment benefit or other support, were he or she not employed in his or her current job.
structural change: Structural change or structural transformation refers to a process by which a dual economy loses its informal sector and becomes a fully capitalist economy.
surplus labour: Workers who are engaged in production but do not increase total output may be referred to as surplus labour (particularly in the Lewis model of economic development).
tariff: A tax on a good imported into a country.
trade union: An organization consisting predominantly of employees, the principal activities of which include the negotiation of rates of pay and conditions of employment for its members.