Dual Economy Model a Analyze
three or more. 7
DUAL ECONOMY DESIGNS: A EVALUATE
The growth types considered in Chapter a couple of are highly aggregative and some economic analysts (Lewis 1954; Fei and Ranis 61, 1964; Jorgenson 1961, 1967; Dixit late 1960s, 1971; Kelly et ing. 1972) started to analyse the problems in terms of two sectors, particularly agriculture and industry. In brief, the socalled traditional non-capitalist agricultural sector is supposed to end up being unresponsive to economic offers and here the leisure tastes are imagined to be high; production for the market will not take place and producers obviously do not comply with profit-maximizing guidelines: вЂdisguised' or open joblessness is supposed to prevail throughout the rural sector as well as the minor productivity of labour is definitely expected to become zero, and in some cases negative (Nurkse 1953). Income is comparable to subsistence level (Leibenstein 1957: 154) to some extent determined by physical and to some extent by ethnic levels (Lewis 1954). Further more, capital does not have any role to learn in agricultural production (Jorgenson 1967: 291). Two groups are connected by the influx of surplus homogenous work from culture to industry. Nothing happens to the transfer of cost savings or capital and progress takes place when demand soars as a result of ploughing back of income by the capitalists into reinvestment. The in reverse sector is eventually вЂmodernized' with the transfer of all excessive labour via agriculture. The extension of the Lewis model by simply Fei and Ranis (1964) also is experiencing some limitations. First, not any attempt is done by Fei and Ranis to be the cause of stagnation. Second, no clear distinction is manufactured between family-based labour and wage-based work and nothing is said about the process of self-sustaining development. The expenditure function is not particular and cash, price, forex trading as well as terms of control between cultivation and market are dismissed. The dual economy model of Jorgenson is based on familiar neoclassical lines nevertheless this barely helps us to accept that as a more sound theory or, better, in terms of it is predictive ability. For example , Jorgenson considers terrain and labour only regarding their gardening production function and ignores the part of hard to find capital. Jorgenson assumes which a surplus develops when farming output per head is usually greater than the income level at which the population growth price is at its вЂphysiological maximum'. This is difficult to comprehend just because a clear meaning of physiological maximum is inadequate and a surplus may well exist could the point at which profits corresponding for this maximum is reached. Jorgenson, like Fei and Ranis, neglects the role of money and operate. No capital formation occurs in farming in Jorgenson's model; no attempt was created to analyse the problems of disguised unemployment in agriculture in fact it is assumed the industrial wage is equal to the minor productivity of labour. The shortcomings in the Jorgenson version vis-Г -vis the FR version lie in the assumption of the вЂMalthusian response mechanism and a zero income flexibility of the demand for food' (Hayami et 's 1971: 22вЂ“3). Population progress in LDCs is not always determined by usage per head. Also, the case for a zero income suppleness of the with regard to food is definitely not well supported in practice (NCAER 1972). (For an extension of the Jorgenson model, discover Ramanathan (1967), where a number of the restrictive assumptions are comfortable. ) In both the FR and Jorgenson models, it is implicitly believed that technological progress would be of a labour-augmenting type. This might not happen used (Krishna 1975). The Lewis and FR models have problems with an additional some weakness in lounging the emphasis only on accumulation but not on technical progress. In the event growth in the Lewis-FR trend means rise in income and if the little propensity in order to food is usually positive for almost any group of cash flow recipients, then simply, with given output, food prices can rise that can raise pay and reduce earnings and expansion. Thus any kind of accumulation improves...