Introduction
Dual economy is an economy in which different sectors are growing at different rates. For example manufacturing and services industries or rural and urban areas many show significant differences in economic performance.
Less developed countries have generally a dualistic economy, consisting of a large backward agrarian sector and a small modern manufacturing sector. During the process of development, an economy moves from a dual structure to one characterized by a larger industrial sector and a more efficient agrarian sector. The role of the agrarian sector in the process of development has traditionally been downplayed and often completely neglected, possibly due to the decline this sector experiences in the process.
This …show more content…
To be employed in manufacturing requires some initial human capital investment. Poor individuals are excluded from this sector because of credit market imperfections. However, some of the poor can still obtain income in the agrarian sector, since they can rent land through a tenurial contract, which, as in the case of sharecropping, need not require an ex-ante payment. Their future offspring can then invest in human capital and migrate to the manufacturing formal sector. Finally, those poor who cannot find employment in the agrarian sector can only be employed in the informal …show more content…
Land redistribution may decrease the number of poor individuals enough to trigger the transition to a modern equilibrium.
2. a one-shot policy of mass education is also needed to complement land reform, because it gives to some poor the option of working in the manufacturing sector.
Without a sufficiently productive agrarian sector, the manufacturing sector would disappear, and the entire economy would remain in a poverty trap equilibrium arising from credit market imperfections. Therefore, we show how agrarian sector and, in particular, land tenurial contracts can be a powerful device to overcome the barrier of required initial investments.
The features of this dual equilibrium are consistent with the model of a dual economy pioneered by Lewis (1954). In accordance with Lewis’s analysis, development is de.ned as the path of an economy moving from a dual to a modern equilibrium. However, in Lewis’s model the agrarian sector only supplies general labor force to manufacturing, while in our paper the agrarian sector has the more active role of determining supply of the skilled labor.
The Model
Proposition 1 When there is excess demand for land, L < 1 – w - l; the economy is in a Dual Equilibrium. When L > 1 – w - l the economy is in a Modern
Dual economy is an economy in which different sectors are growing at different rates. For example manufacturing and services industries or rural and urban areas many show significant differences in economic performance.
Less developed countries have generally a dualistic economy, consisting of a large backward agrarian sector and a small modern manufacturing sector. During the process of development, an economy moves from a dual structure to one characterized by a larger industrial sector and a more efficient agrarian sector. The role of the agrarian sector in the process of development has traditionally been downplayed and often completely neglected, possibly due to the decline this sector experiences in the process.
This …show more content…
To be employed in manufacturing requires some initial human capital investment. Poor individuals are excluded from this sector because of credit market imperfections. However, some of the poor can still obtain income in the agrarian sector, since they can rent land through a tenurial contract, which, as in the case of sharecropping, need not require an ex-ante payment. Their future offspring can then invest in human capital and migrate to the manufacturing formal sector. Finally, those poor who cannot find employment in the agrarian sector can only be employed in the informal …show more content…
Land redistribution may decrease the number of poor individuals enough to trigger the transition to a modern equilibrium.
2. a one-shot policy of mass education is also needed to complement land reform, because it gives to some poor the option of working in the manufacturing sector.
Without a sufficiently productive agrarian sector, the manufacturing sector would disappear, and the entire economy would remain in a poverty trap equilibrium arising from credit market imperfections. Therefore, we show how agrarian sector and, in particular, land tenurial contracts can be a powerful device to overcome the barrier of required initial investments.
The features of this dual equilibrium are consistent with the model of a dual economy pioneered by Lewis (1954). In accordance with Lewis’s analysis, development is de.ned as the path of an economy moving from a dual to a modern equilibrium. However, in Lewis’s model the agrarian sector only supplies general labor force to manufacturing, while in our paper the agrarian sector has the more active role of determining supply of the skilled labor.
The Model
Proposition 1 When there is excess demand for land, L < 1 – w - l; the economy is in a Dual Equilibrium. When L > 1 – w - l the economy is in a Modern