Dualmodels - Oa L2 supply of labor S L Wi THE LEWIS MODEL...

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DUALISM & URBAN BIAS Notions of Dualism: Industry vs. Agriculture Urban vs. Rural Modern vs. Traditional » Technology; life style; culture; education; scale Oil vs. non oil Foreign Invested vs. Domestic Implications: Urban bias was common in policy Makes structuralist approach more attractive over NC Development would require interaction between sectors
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THE LEWIS MODEL ASSUMPTIONS: MP of L is elastic in agriculture W = subsistence wage D for L is generated by industry Diminishing MP of L in industry Profit in industry is reinvested in industry Technology is fixed
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wage; mpL; industry wage; mpL; agriculture Labor in industry Labor in agriculture L1 Demand for Labor = value of the MP of L Oi Oa supply of labor S W THE LEWIS MODEL
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wage; mpL; industry wage; mpL; agriculture Labor in industry Labor in agriculture L1 Oi
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Unformatted text preview: Oa L2 supply of labor S L* Wi THE LEWIS MODEL Wa Wi2 Wa2 D1 D2 D3 L3 HARRIS-TODARO MODEL • An Extension of the Lewis Model • Adds a Link between Two Sectors • Model Predicts Migration from Rural to Urban as long as the wage in the organized urban sector times the probability of getting a job is greater or equal to the wage in agriculture • Explains the existence of unemployment, and an informal sector, in urban areas THE HARRIS-TODARO MODEL OF MIGRATION Organized, urban sector: labor Agricultural sector: labor Wage, urban Wage, rural Wo Wa Demand for labor Lo La Total urban labor force Agricultural labor force Supply of rural labor Expected urban wage = probability of finding a job times the urban wage; Wu* = p(Wu); Migration: Mt = h(pWu – Wr)...
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