Domar’s theory of slavery and serfdom starts with the assumptions that land and labour are the only factors of production, and that land of uniform quality and location are prevalent. No diminishing returns in the application of labour to land appear; both the average and the marginal productivities of labour are constant and equal. He relaxes the assumption that uniform land is prevalent, and includes capital and management in the factors of production. In addition, Domar claims that there are 3 relevant agricultural structures in his model—abundant free land, abundant free labour, and large-scale agriculture. Domar claims that any 2 of these 3 elements can exist cohesively, but all 3 elements cannot exist simultaneously in any particular situation.
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Production being a function of land and labour, and under the assumptions that production requires only land and labour, production demonstrates constant returns to scale, and there is an abundance of free land, then free-wage labour will not exist. Additionally, the combination that will be found will depend more on the behaviour of political factors—governmental measures—which are treated as an exogenous variable. This exogenous variable diminishes the accuracy of the Domar Model by making the presence of free land by itself neither a necessary nor sufficient condition for the existence of
Production being a function of land and labour, and under the assumptions that production requires only land and labour, production demonstrates constant returns to scale, and there is an abundance of free land, then free-wage labour will not exist. Additionally, the combination that will be found will depend more on the behaviour of political factors—governmental measures—which are treated as an exogenous variable. This exogenous variable diminishes the accuracy of the Domar Model by making the presence of free land by itself neither a necessary nor sufficient condition for the existence of