The Dual Economy in Long-run Development

Vollrath, Dietrich (2008): The Dual Economy in Long-run Development.

Abstract

This paper provides a dynamic model of the dual economy in which differences in productivity across sectors arise endogenously. Rather than relying on exogenous price distortions, duality arises because of differences between sectors in the separability of their fertility and labor decisions. The model demonstrates how a dual economy will originate, persist, and eventually disappear within a unified growth framework. It is also shown that agricultural productivity growth will exacerbate the inefficiencies of a dual economy and slow down long-run growth.

• Item Type: MPRA Paper
• Language: English
• Keywords: Dual economy, unified growth, endogenous fertility
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O41 - One, Two, and Multisector Growth Models; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O13 - Agriculture ; Natural Resources ; Energy ; Environment ; Other Primary Products; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q10 - General

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