DUAL ECONOMY MODELS: A PRIMER FOR GROWTH ECONOMISTS

Authors

  • JONATHAN TEMPLE

    1. Department of Economics, University of Bristol
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       This paper draws on joint work with Bryan Graham, Mathan Satchi and Ludger Woessmann. I have also benefited from discussions on some of these topics with Francesco Caselli, Antonio Ciccone, Carl-Johan Dalgaard, Stefan Dercon, Theo Eicher, Norman Gemmell, John Landon-Lane, Paul Oslington, Stephen Redding and Peter Robertson, and seminar participants at many places, but especially Bristol, Cambridge, Oxford and the LSE. I would like to thank the Leverhulme Trust for financial support under the Philip Leverhulme Prize Fellowship scheme. The usual disclaimer applies.


Abstract

This paper argues that dual economy models deserve a central place in the analysis of growth in developing countries. The paper shows how these models can be used to analyse the output losses associated with factor misallocation, aggregate growth in the presence of factor market distortions, international differences in sectoral productivity and the potential role of increasing returns to scale. Above all, small-scale general equilibrium models can be used to investigate the interactions between growth and labour markets, to shed new light on the origins of pro-poor and labour-intensive growth, and to explore the role of the informal sector.

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