The dual economy in long-run development

Vollrath, Dietrich

doi:10.1007/s10887-009-9045-y

Cited by 66 publications

(49 citation statements)

References 45 publications

(51 reference statements)

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“…This pattern is perfectly consistent with the models of industrialization based on the dual economy model (Lewis, 1954; for more recent contributions see e.g. Barenjee and Newman, 1998; Proto, 2007;Vollrath, 2009a;Vollrath, 2009b). At the beginning of a process of development the modern section of the economy is characterized by a growing informal sector, generated by individuals who are not able to …nd a job in the formal sector.…”

Section: Characterization Of Market Equilibriumsupporting

confidence: 82%

Anonymity, efficiency wages and technological progress

Broadberry

Ghosal

Proto³

2017

Journal of Development Economics

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Although the Industrial Revolution is often characterized as the culmination of a process of commercialisation, the precise nature of such a link remains unclear.This paper provides an analysis of one such link: the role of commercialisation in raising wages as impersonal labour market transactions replace personalized customary relations. In the presence of an aggregate capital externality, we show that the resulting shift in relative factor prices will, under certain conditions, lead to higher capital-intensity in the production technology and hence, a faster rate of technological progress. We provide historical evidence using European data to show that England was among the most urbanized and the highest wage countries at the onset of the Industrial Revolution. The model highlights the e¤ects of changes in the availability of information, typical of a modernizing country, on e¢ ciency wages and technological progress.JEL classi…cation: N13, O14, O43

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Section: Characterization Of Market Equilibriumsupporting

confidence: 82%

Anonymity, efficiency wages and technological progress

Broadberry

Ghosal

Proto³

2017

Journal of Development Economics

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“…The first is the agrarian structure as defined by land ownership. All things being equal, a more egalitarian agrarian ownership structure leads to more rapid growth, stronger poverty reduction impacts [7] and higher public investments in education and infrastructure that is critical to long-run inclusive growth [8,9].…”

Section: Introductionmentioning

confidence: 99%

The Fall and Rise Again of Plantations in Tropical Asia: History Repeated?

Byerlee¹

2014

Land

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Abstract:The type of agrarian structure employed to produce tropical commodities affects many dimensions of land use, such as ownership inequality, overlapping land rights and conflicts, and land use changes. I conduct a literature review of historical changes in agrarian structures of commodities grown on the upland frontier of mainland Southeast and South Asia, using a case study approach, of tea, rubber, oil palm and cassava. Although the production of all these commodities was initiated in the colonial period on large plantations, over the course of the 20th century, most transited to smallholder systems. Two groups of factors are posited to explain this evolution. First, economic fundamentals related to processing methods and pioneering costs and risks sometimes favored large-scale plantations. Second, policy biases and development paradigms often strongly favored plantations and discriminated against smallholders in the colonial states, especially provision of cheap land and labor. However, beginning after World War I and accelerating after independence, the factors that propped up plantations changed so that by the end of the 20th century, smallholders overwhelmingly dominated perennial crop exports, except possibly oil palm. Surprisingly, in the 21st century there has been a resurgence of investments in plantation agriculture in the frontier countries of Cambodia, Laos and Myanmar, driven by very similar factors to a century ago, especially access to cheap land combined with high commodity prices. As in the last century, this may be a temporary aberration from the long-run trend toward smallholders, but much depends on local political economy.

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“…Based on a three-sector (agrarian, manufacturing, and informal) model, Proto (2007) analyzes how the initial number of unskilled landless workers, through its effect on their bargaining power against landlords and land rents, determines wealth and human capital accumulations and development. Vollrath (2009) shows that the marginal product of labor in the modern sector can be higher than in the traditional sector and such allocation is welfare-maximizing based on a model in which individuals allocate time between market and non-market activities.…”

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confidence: 99%

“…The analysis would be much more complicated without affecting most qualitative results. 16 In real economy, there exist skill-intensive modern sectors supplying nontradables. However, in developing countries, most of skill-intensive nontradables are public services, health services, and education, where market forces have limited roles, while sectors such as finance and consulting services are limited in size.…”

mentioning

confidence: 99%

Education, Inequality, and Development in a Dual Economy

Yuki

2014

SSRN Journal

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In the post-WWII era, most developing economies had decent economic growth, but, with current growth trends, the great majority of them are unlikely to transform into developed economies in near future. In these economies, the dual economic structure, the coexistence of the modern/formal sector and the traditional/informal sector, is persistent.The educational level of the population increased greatly, but the growth of the skill level, especially when measured by the share of high-skill workers, is relatively modest. Wage inequality between workers with basic skills and with advanced skills rose over time, while the inequality between workers with and without basic skills fell greatly.In order to understand these facts, this paper develops a dynamic dual-economy model and examines how the long-run outcome of the economy depends on the initial distribution of wealth and sectoral productivity. It is shown that, for fast transformation into a developed economy, the initial distribution must be such that extreme poverty is not prevalent and the size of "middle class" is enough. If the former is satisfied but the latter is not, which would be the case for many developing economies falling into "middle income trap", the fraction of workers with basic skills and the share of the modern sector rise, but inequality between workers with advanced skills and with basic skills worsens and the traditional sector remains, consistent with the above-mentioned facts. JEL Classification Numbers: I25, J31, O15, O17

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The dual economy in long-run development

Cited by 66 publications

References 45 publications

Anonymity, efficiency wages and technological progress

Anonymity, efficiency wages and technological progress

The Fall and Rise Again of Plantations in Tropical Asia: History Repeated?

Education, Inequality, and Development in a Dual Economy

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