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Labor Surplus Economies
Gustav Ranis Yale University - Department of Economics December 2004 Yale University Economic Growth Center Discussion Paper No. 900 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.
Keywords: Development theory, labor markets JEL Classifications: O10, O12, O17 Working Paper SeriesDate posted: December 07, 2004 ; Last revised: December 07, 2004Suggested CitationContact Information
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