Example of economic dualism, International Economics

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Q. It has been argued that economic dualism that typifies relatively less developed or poor countries, is a barrier to participation in the global village, and lessens the chances that such countries will take their place in the economic growth race. Illustrate this argument.

Answer: Economic dualism first methodically explored by Lewis describes economies in which the marginal cost of shifting labour from the traditional to the modern sector is zero. This denotes that the modern sector enjoys a perfectly elastic labour supply and two wage levels exist simultaneously. The latter is classic of a distorted labour market and indicates that the country isn't on its production possibility frontier. Though it doesn't indicate that such a country can't partake in international trades. The traditional sector is able to produce commodities very cheaply the wage is close to zero and the modern sector is able to respond flexibly to demand patterns abroad because of its elastic and inexpensive supply of labour.


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