AN EXTENSION OF SEN'S MODEL OF 1HE VALUATION OF LABOUR IN SURPLUS LABOUR ECONOMJFS

Anthony Thirlwall

The Pakistan Development Review, 1970, vol. 10, issue 3, 393-396

Abstract: Professor A. K. Sen argues in his book Choice of Techniques l that if the objective of a surplus labour economy is to maximise growth, as opposed . to the level of immediate output, and savings are suboptimal, labour drawn from the agricultural to the industrial sector should not be regarded as 'costless' even though its marginal product may have been zero. The reasoning is that while the marginal product of the labour may be positive in industry, a low-shadow wage will cause consumption out of money wages to increase more than production reducing the size of the investible surplus. If greater importance is attached to an additional unit of saving than consumption, the transference of labour involves a 'cost' in terms of extra consumption.

Date: 1970
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