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THE MICRO-FOUNDATIONS OF DUAL ECONOMY MODELS

Authors

  • XIAOBING WANG,

    1. The University of Manchester
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  • JENIFER PIESSE

    1. King's College London
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    • The authors thank the editors of this journal, Keith Blackburn and Chris Orme, the anonymous referees, Ed Amann, Jeremy Clegg, Indranil Dutta, Fung Kwan, Xiaming Liu, Adam Ozanne, Paul Ryan, Roger Strange, Jonathan Temple, Tony Thirlwall, Bernard Walters, Nick Weaver and the seminar participates at a number of universities for valuable comments and suggestions, and especially Nick Weaver, with whom the many long discussions have helped to significantly improve this paper.


  • Manuscript received 2.6.10; final version received 4.1.11.

Abstract

This paper provides microfoundations for dual economy models. First, the patterns of production and population growth in the traditional agricultural sector are examined. This shows the connection between long-run per capita income and subsistence wages. Second, it proves the existence of surplus labour and defines two types of surplus labour. Third, it considers two wage determination mechanisms in the modern sector and their relationships with the requirement for labour market restrictions. Fourth, the labour market is linked to food supply. Fifth, the dynamics of surplus labour and labour transfer are considered and two types of turning point are defined.

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