Labor Surplus Revisited

Gustav Ranis ()
Additional contact information
Gustav Ranis: Economic Growth Center, Yale University

Working Papers from Economic Growth Center, Yale University

Abstract: 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.

Keywords: development; labor surplus; neo-classical economics; turning point labor markets (search for similar items in EconPapers)
JEL-codes: O10 O11 O17 O18 O41 O43 O57 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-08
New Economics Papers: this item is included in nep-dev, nep-iue and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.econ.yale.edu/growth_pdf/cdp1016.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:egc:wpaper:1016

Access Statistics for this paper

More papers in Working Papers from Economic Growth Center, Yale University Contact information at EDIRC.
Bibliographic data for series maintained by Benjamin King ( this e-mail address is bad, please contact ).