Labor Surplus Revisited
AbstractUnskilled labor is the abundant resource in many developing countries, especially at an early stage of their development. Yet, even as at given technologies labor markets have not cleared, neo-classical economists have rejected the notion of an institutional or bargaining wage not based on competitive full employment marginal productivity fundamentals. This paper puts to rest some objections to labor surplus theory based on "red herrings" and then addresses the substantive challenges from the micro-econometric branch of neo-classical economics. We contend that the finding of inelastic supply curves of labor is based on a cross-section static analysis of labor supply within agriculture while the labor surplus model deals with tracing the dynamic reallocation of labor from a traditional to a neo-classical organized sector in a dualistic economy. We present data for a number of labor surplus developing countries showing that institutional wages lag behind agricultural productivity increases as countries move towards a "turning point" when inter-sectoral balanced growth has eliminated unskilled labor and the economy has lost its dual characteristic.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Yale University, Department of Economics in its series Working Papers with number 107.
Date of creation: Sep 2012
Date of revision:
Find related papers by JEL classification:
- O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
- O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
- O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-17 (All new papers)
- NEP-DEV-2012-11-17 (Development)
- NEP-IUE-2012-11-17 (Informal & Underground Economics)
- NEP-LAB-2012-11-17 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Vollrath, Dietrich, 2009. "How important are dual economy effects for aggregate productivity?," Journal of Development Economics, Elsevier, vol. 88(2), pages 325-334, March.
- Manning,Chris, 1998. "Indonesian Labour in Transition," Cambridge Books, Cambridge University Press, number 9780521594127, December.
- K.V. Ramaswamy, 2008.
"Wage inequality in Indian manufacturing: Is it trade, technology or labour regulations?,"
Indira Gandhi Institute of Development Research, Mumbai Working Papers
2008-021, Indira Gandhi Institute of Development Research, Mumbai, India.
- K.V. Ramaswamy, 2008. "Wage Inequality in Indian Manufacturing - Is it Trade, Technology or Labour Regulations?," Labor Economics Working Papers 22361, East Asian Bureau of Economic Research.
- Ranis, Gustav & Stewart, Frances, 1993. "Rural nonagricultural activities in development : Theory and application," Journal of Development Economics, Elsevier, vol. 40(1), pages 75-101, February.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.