The Dual Economy Revisited

Abstract

I welcome the Editor's invitation to contribute to this anniversary symposium. My thoughts on the subject have wandered not in the direction of new theoretical concepts, but rather towards a set of reflections on the usefulness of the dual economy model. Like most other models this one has illuminated both more and less than was intended; more in the extent to which it. is used by some writeis to explain recent developments in mature industrial countries (notably Kindlebergcr, 1967;Cornwall, 1977), and less in the speed with which real wages have risen in some labour-rich developing societies, in defiance not only of the model but also of previous historical experience. These reflections are therefore mainly factual.The dual economy model comes in a wide range of specifications, since each writer is free to make his own assumptions. The version that I am using here has three characteristics. First, there are two sectors, hereinafter called "modem" and "traditional", such that the modem sector grows by recruiting labour from the traditional. Secondly, unskilled labour is paid more in the modem sector than in the traditional sector for the same quantity and quality of work. And thirdly, unskilled labour is initially abundant' in the sense that at the current wage much more labour is offered to the modem sector than that sector wishes to hire.The inodel focusses on explaining the distribution of income inside the modem sector, and therefore the rate of growth of the modern sector, but it has many other ramifications.This essay will not concern itself with the mechanics of the model; or with comparisons between this and the numerous other versions of two-sector models. It will concentrate on three general topics :The effects of the modem and traditional sectors on each other. The sources of labour abundance. The maintenance of differentials in the labour market. 2. 3.1The phrase "surplus labour" is not used in this essay since it causes emotional distress. As always, the idea intended to be conveyed is that of an in6nitely elastic supply of labour to the modern sector at the current wage. 21 1

Evidence on Discrimination in Employment: Codes of Color, Codes of Gender

“…A second nontraditional theory that can lead to a permanent gap in intergroup outcomes is the noncompeting groups hypothesis advanced by the late W. Arthur Lewis (1979). Related arguments emerge from Krueger's (1963) extension of the trade-based version of the Becker model, Swinton's (1978) ''labor force competition'' model for racial differences, and Madden's (1975) male monopoly model for gender differences, but Lewis's presentation is the most straightforward.…”

¿Informalidad o dualismo en las manufacturas mexicanas?

“…El modelo de Lewis se centra en el producto medio del trabajo en el sector rural, y propone que hay emigración cuando se percibe que en el sector moderno puede obtenerse un salario superior al ingreso rural. Sin embargo, como lo sugiere el propio Lewis (1979), no toda la nueva oferta laboral se integra necesariamente al sector moderno. En efecto, el emigrante rural enfrenta tres opciones: empleo formal urbano, desempleo o empleo informal en las ciudades.…”

Labour Market Dualism in the Lewis Model: Reply

“…Later, Lewis (1979) also distinguished between the urban formal sector and the urban informal sector. In my view, such three-and four-state models are more realistic and should serve as the foundation for current efforts to understand the role of labour markets in the process of economic development.…”