|Abstract or Summary
- Traditionally employment and output have been the major two criteria for evaluating aggregate performance in a dual economic model for less developed countries. This has been mainly discussed by transferring labor from the agricultural sector to non-agricultural use. Most models are specified in such a manner that the migrated agricultural workers will be absorbed in non-agricultural jobs. In reality though, the transformation of labor to the non-agricultural sector (i. e., industrial or urban) has created an unemployment problem in that sector.
The purposes of this paper are (1) to study some of the relevant common characteristics of less developed countries, (2) to review the literature related to labor employment, and (3) to demonstrate the importance of the efficiency of employment and output in dualistic development models. This paper has reviewed three classes of models. First, this study has considered the Fei-Ranis model of economic development which has drawn heavily from W. A. Lewis’s model of
economic development with unlimited supplies of labor (Fei-Ranis is primarily a classical model). Second, the Jorgenson’s model of development of a dual economy has been presented. This model is based on Harrod-Domar's concept of steady growth, Third, this study looks at a more recent model, the Todaro model, which considered the practical problem of urban (industrial) unemployment. The problem of urban-unemployment is not considered by the first two models. Todaro's approach to the development of a dual economy may be the beginning of a new trend in the literature. On the basis of findings of this work it was concluded that: (1) The transformation of an agricultural surplus labor economy to an industrial surplus labor economy, can only be justified by a careful consideration of the production possibilities of each case, and the demand for the products of each sector. (2) The rate of growth of each sector will be dictated by the optimum growth path. This is the locus of optimum combination of output and employment of resources in each sector in the given time period. Because production possibilities and demand considerations operate to determine the optimum growth path, this path will rarely if ever coincide with the straight-line balanced growth path prominent in the Fei-Ranis model.