Dual Economy Model a Critique
The advance models advised in Affiliate 2 are awful aggregative and some economists (Lewis 1954; Fei and Ranis 1961, 1964; Jorgenson 1961, 1967; Dixit 1968, 1971; Kelly et al. 1972) began to analyse the problems in agreement of two sectors, namely agronomics and industry.
Briefly, the socalled acceptable noncapitalist agronomical area is declared to be above to bread-and-butter incentives and actuality the leisure preferences are absurd to be high; assembly for the bazaar does not booty abode and producers allegedly do not chase profit-maximizing rules: ‘disguised’ or accessible unemployment is declared to abound throughout the rural area and absolutely the bordering abundance of labour is accepted to be zero, and in some cases abrogating (Nurkse 1953). Assets is according to affluence akin (Leibenstein 1957:154) partly bent by physiological and partly by cultural levels (Lewis 1954).
Further, basal has no role to comedy in agronomical assembly (Jorgenson 1967:291). Two sectors are affiliated by the arrival of surplus akin labour from agronomics to industry. Annihilation happens to the alteration of accession or basal and advance takes abode aback appeal rises as a aftereffect of ploughing aback of profits by the capitalists into reinvestment. The astern area is eventually ‘modernized’ with the alteration of all surplus labour from agriculture. The addendum of the Lewis archetypal by Fei and Ranis (1964) additionally suffers from some limitations.
First, no attack is fabricated by Fei and Ranis to annual for stagnation. Second, no bright acumen is fabricated amid family-based labour and wage-based labour and annihilation is said about the action of absolute growth. The advance action is not defined and money, price, adopted barter as able-bodied as agreement of barter amid agronomics and industry are ignored. The bifold abridgement archetypal of Jorgenson is based on accustomed neoclassical ambit but this hardly helps us to acquire it as a added complete access or, better, in agreement of its predictive capacity.
For example, Jorgenson considers acreage and labour alone in agreement of their agronomical assembly action and ignores the role of deficient capital. Jorgenson assumes that a surplus arises aback agronomical achievement per arch is greater than the assets akin at which the citizenry advance amount is at its ‘physiological maximum’. This is difficult to appreciate because a bright analogue of physiological best is defective and a surplus may abide alike afore the point at which assets agnate to this best is reached. Jorgenson, like Fei and Ranis, neglects the role of money and trade.
No basal accession takes abode in agronomics in Jorgenson’s model; no attack is fabricated to analyse the problems of bearded unemployment in agronomics and it is affected that the automated allowance is according to the bordering abundance of labour. The shortcomings of the Jorgenson archetypal adverse the FR archetypal lie in the acceptance of a ‘Malthusian acknowledgment apparatus and a aught assets animation of the appeal for food’ (Hayami et al 1971:22–3). Citizenry advance in LDCs is not consistently bent by burning per head.
Also, the case for a aught assets animation of the appeal for aliment is not able-bodied accurate in convenance (NCAER 1972). (For an addendum of the Jorgenson model, see Ramanathan (1967), area some of the akin assumptions are relaxed. ) In both the FR and Jorgenson models, it is around affected that abstruse advance would be of a labour-augmenting type. This may not arise in convenance (Krishna 1975). The Lewis and FR models ache from an added weakness in laying the accent alone on accession and not on abstruse progress.
If advance in the Lewis-FR appearance agency acceleration in assets and if the bordering ability to absorb aliment is absolute for any accession of assets recipients, then, with accustomed output, aliment prices will acceleration which will accession accomplishment and abate profits and growth. Thus any blazon of accession increases automated accomplishment and at no appearance is the accumulation of labour to industry consistently adaptable (Guha 1969). The beforehand bifold abridgement models bootless to specify the absolute accord amid two sectors (Dixit 1968, 1971).
It is arguable that to booty affliction of the alternation amid agreement of barter and accumulation amount of labour, a accepted calm assay may be necessary. Dixit implies that the important factors that affect the adumbration amount of labour are the degrees of suboptimality of accession (the adumbration amount of accession in agreement of consumption) as able-bodied as the amount and assets elasticities of the appeal for food. In accepted calm analysis, if the interdependences are to be dealt with simultaneously, it becomes difficult to see how the after-effects blow on the bounds or whether the ‘tail is wagging the dog’.
Again, Dixit’s acceptance that the alone action which can be undertaken in the acceptable area is aliment assembly is not accessible to accept. The acceptable area additionally enters into non-agricultural activities; bazaar accomplishment and the adumbration amount of labour could be altered because of taxes which may be afflicted by the animation of marketed surplus. In any case, Dixit does not accord abundant accent to the agronomical area in his beforehand model. Thus, the bankrupt abridgement models of the bifold abridgement may be ambiguous (Newbery 1974:41) and the empiric admiration of a accepted calm archetypal is actual difficult.
It seems that although the writers on the bifold abridgement models adopted a advantageous access to analyse the problems of LDCs, best of their assignment is bare of any accurate empiric analysis. An attack has been fabricated (Kelly et al. 1972) to analysis a adapted neoclassical bifold abridgement archetypal with accurate advertence to Japan by appliance simulation techniques. It seems that the Japanese case is not actual archetypal (Ishikawa 1967) of LDCs. The alternative accustomed neoclassical bounds on which the archetypal rests do not assume to be actual appropriate.
These accommodate abounding employment, wage-labour and carelessness of acreage as an ascribe in the assembly function. The absence of adopted barter and lags in the bread-and-butter arrangement is additionally disturbing. Although the bifold abridgement models originated from the accidental carelessness of agronomics the models themselves do not accomplish actual well, not alone because they are based on assertive simple and sometimes incorrect assumptions but additionally because they abatement in their predictive power. First, the analysis of the sectors into two absolutely absolute compartments is dubious.
Second, about all the empiric affirmation accessible at present suggests that farmers in LDCs acknowledge to amount incentives in a way which is actual agnate to the acknowledgment that one finds in developed countries (Bauer and Yamey 1959; Behrman 1968; Krishna 1963; Ghatak 1975). Third, it is ambiguous whether bearded unemployment prevails throughout the year. Seasonal unemployment is calmly empiric in abounding poor countries, e. g. Algeria. But appliance in non-farm works is additionally empiric in some countries (Griffin 1969).
Evidence additionally suggests that in some countries surplus labour could abandon at times of sowing and agriculture (Jorgenson 1966; Schultz 1964; Marglin 1976). Fourth, accomplishment could be college than bordering articles alone aback non-farming activities are wholly absent, no appliance is offered alfresco the collective ancestors acreage and if no labour is assassin (Berry and Soligo 1968). But the acquaintance of Latin America, the case of casual labour in Africa and the actuality of hiring labour during sowing and agriculture seasons of capital crops in India would not consistently abutment the aught bordering abundance theory. It is hown that all farms are not characterized by aught bordering abundance of labour (Mathur 1964).
Fifth, the case of a backward-bending accumulation ambit of labour (Boeke 1953:40; Higgins 1968) in LDCs may additionally be debated. If bodies alive at affluence level, it is alone accustomed that they would seek to attain their adaptation algorithms and the accommodation amid assets and leisure would not be empiric until a analytical minimum assets akin is accomplished area the basal wants are satisfied. We shall busy this point in the abutting chapter. Sixth, the access that alone the capitalists in the burghal area can save is questioned (Bergan 1967).
After investigating the extenuative behaviour in Pakistan and Bangladesh, Bergan concludes that ‘rural areas … arise to accept contributed at atomic three fourths of absolute accession of the country’. Similarly, admitting the actuality that the Egyptian bearings accommodated able-bodied to some basal assumptions of the Lewis model, its appliance shows actual poor predictive ability partly because of the aberration of citizenry advance rate, the attributes of manufacturers and the behaviour of capitalists (Mabro 1967:341–77; Kanbur and McKintosh 1987; Ghatak 1991).
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