Labor surplus revisited

Arbeitspapier

Unskilled labor is the abundant resource in many developing countries, especially at an early stage of their development. Yet, even as at given technologies labor markets have not cleared, neo-classical economists have rejected the notion of an institutional or bargaining wage not based on competitive full employment marginal productivity fundamentals. This paper puts to rest some objections to labor surplus theory based on red herrings and then addresses the substantive challenges from the micro-econometric branch of neo-classical economics. We contend that the finding of inelastic supply curves of labor is based on a cross-section static analysis of labor supply within agriculture while the labor surplus model deals with tracing the dynamic reallocation of labor from a traditional to a neo-classical organized sector in a dualistic economy. We present data for a number of labor surplus developing countries showing that institutional wages lag behind agricultural productivity increases as countries move towards a turning point when inter-sectoral balanced growth has eliminated unskilled labor and the economy has lost its dual characteristic.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economic Growth Center Discussion Paper ; No. 1016

Classification and Topics

• Classification: Wirtschaft ; Economic Development: General ; Macroeconomic Analyses of Economic Development ; Formal and Informal Sectors; Shadow Economy; Institutional Arrangements ; Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure ; One, Two, and Multisector Growth Models ; Institutions and Growth ; Comparative Studies of Countries
• Subject: development ; labor surplus ; neo-classical economics ; turning point labor markets ; development ; labor surplus ; neo-classical economics ; turning point labor markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ranis, Gustav
• Event: Veröffentlichung
• (who): Yale University, Economic Growth Center
• (where): New Haven, CT
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/98221
• Last update: 10.03.2025, 11:42 AM CET