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The dual economy paradox: the case of Bangladesh and India

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Listed:
  • Sakib Bin Amin

    (North South University)

  • Farhan Khan

    (North South University)

  • Mashiyat Rafa Khan

    (North South University)

  • Jaahin Azam Oyishi

    (North South University)

Abstract

We aim to examine Lewis–Ranis–Fei (LRF) model’s predictions of economic development phases for Bangladesh and India. In this regard, we use annual data covering from 1990 to 2019 and apply robust econometric methods for estimating the sectoral (agriculture and non-agriculture) production functions to calculate the Marginal Productivity of Labor (MPL) and the labor reallocation effect. We find that both India and Bangladesh are in the second phase of the LRF model. Moreover, dynamic simulation reveals that Bangladesh will likely reach the LRF turning point before India due to the relatively high labor reallocation effect. Obtained results indicate that observed development pattern is due to country-specific economic and prevailing social characteristics. Based on the results, we also provide a few policy suggestions for both countries’ economic sustainability.

Suggested Citation

  • Sakib Bin Amin & Farhan Khan & Mashiyat Rafa Khan & Jaahin Azam Oyishi, 2023. "The dual economy paradox: the case of Bangladesh and India," SN Business & Economics, Springer, vol. 3(9), pages 1-22, September.
    • Handle: RePEc:spr:snbeco:v:3:y:2023:i:9:d:10.1007_s43546-023-00540-2
    DOI: 10.1007/s43546-023-00540-2
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    References listed on IDEAS

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