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Dynamic Dualism

According to Fei and Ranis, economies in southeast Asia and Africa


are characterised by the coexistence of two sectors, a relatively
large and overwhelmingly stagnant subsistence agriculture sector in
which institutional forces determine the wage rate ,,, and relatively
small but growing commercialized industrial sector in which
competitive conditions obtain in the input markets .
In the Fei-Ranis model the subsistence sector is characterised by
Disguised unemployment and underemployment
Zero marginal productivity of labour
A positive institutionally determined wage rate for
agricultural labour ,
Fixed land inputs
Under this conditions Fei and Ranis argue that its possible to
transfer labour from the subsistence sector to the commercial
industry sector without reducing agricultural output and without
increasing the supply price of labour to the industrial sector during
the early stage of development.
Indeed the transfer of one worker from the subsistence to the
nonsubsistence sector results in and agriculture surplus which then
becomes available as an investment fund for development of the
industrial sector
A critical point in the development of the dual economy within the
context or Fei and Ranis Model ,, occurs at the time when the
marginal value product of agricultural labour began to rise above
zero ,,,at this point the transfer of one worker for the subsistence tot
the commercialised industrial sector does not release a sufficiently
large wage fund to support hi consumption in the commercial
industrial sector .\
Another crucial point occurs when the marginal value product of
labour exceeds the institutionally determined wage rate in the
agricultural sector ,,at this point ,, a rise in the industrial wage rate
is required if the industrial commercial sector is to complete
effectively with the subsistence sector for labour ,,, if at this
stage ,,rapid productivity growth in the agriculture sector is
achieved ,,the dualistic features of the economy atrophy and the
agriculture increasingly takes place on the role of an appendage of
the one-sector economy taken as whole
IN the Jorgenson dual economy model ,,the assumptions are of
Zero marginal productivity of labour
an institutionally determined wage rate in the
subsistence sector are dropped. Wages are

determined in an intersector labour market even


during the initials stages of development . As
result labour is never available to the industrial
sector without sacrificing agricultural output ,, and
the terms of the trade move against the industrial
sector .
In his system an economy ability is to generate an agricultural
surplus depends upon three parameters
The rate of technical progress in agriculture
The rate of population growth
The elasticity of out output in the agricultural
sector with respect to changes in the agricultural
labour force
Lewis Model main assumption is on surplus labour available in
agriculture which need to be transferred to the industries