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Labor Surplus Economies

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  • Ranis, Gustav

Abstract

The labor surplus economy model has as its basic premise the inability of unskilled agricultural labor markets to clear in countries with high man/land ratios. In such situations, the marginal product of labor is likely to fall below a bargaining wage, related to the average rather than the marginal product. The reallocation of such disguisedly unemployed workers by means of "balanced" intersectoral growth ultimately permits the entire economy to operate on neo-classical principles. Finally, the paper introduces open economy dimensions, indicates the existence of other labor surplus sub-sectors and briefly responds to neo-classical critiques on both theoretical and empirical grounds.

Suggested Citation

  • Ranis, Gustav, 2004. "Labor Surplus Economies," Center Discussion Papers 28480, Yale University, Economic Growth Center.
    • Handle: RePEc:ags:yaleeg:28480
    DOI: 10.22004/ag.econ.28480
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    References listed on IDEAS

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    1. Rosenzweig, Mark R., 1988. "Labor markets in low-income countries," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 15, pages 713-762, Elsevier.
    2. Yujiro Hayami & V. W. Ruttan, 1970. "Korean Rice, Taiwan Rice, and Japanese Agricultural Stagnation: An Economic Consequence of Colonialism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 84(4), pages 562-589.
    3. Fafchamps, Marcel, 1992. "Solidarity Networks in Preindustrial Societies: Rational Peasants with a Moral Economy," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 147-174, October.
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    Cited by:

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    3. David G. Abler & Vasant A. Sukhatme, 2006. "The “Efficient but Poor” Hypothesis ," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 28(3), pages 338-343.

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