THESIS
2009
ix, 77 p. ; 30 cm
Abstract
Developed by Lewis (1954), the dual economy model powerfully explains the persistent inverse relationship between income and agriculture. However, empirical research conducted to verify such a relationship is far and few. By analyzing both micro- and macro-level empirical evidences, this thesis endeavors to identify the causes and consequences of the effects of dualism, which is, measured indirectly by labor reallocation and directly by the propensity of the agricultural laborers to migrate. Regarding the consequences of dualism, we find consistent and significant negative effects of labor reallocation on the cost of labor and positive effects on sales and productivity growth, using data from over 16,000 manufacturing enterprises. The results remain significant after we instrument labo...[
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Developed by Lewis (1954), the dual economy model powerfully explains the persistent inverse relationship between income and agriculture. However, empirical research conducted to verify such a relationship is far and few. By analyzing both micro- and macro-level empirical evidences, this thesis endeavors to identify the causes and consequences of the effects of dualism, which is, measured indirectly by labor reallocation and directly by the propensity of the agricultural laborers to migrate. Regarding the consequences of dualism, we find consistent and significant negative effects of labor reallocation on the cost of labor and positive effects on sales and productivity growth, using data from over 16,000 manufacturing enterprises. The results remain significant after we instrument labor reallocation by soil and irrigation suitability. Regarding the causes of dualism, we find consistent and significant predicative power of property rights, democracy and civil conflicts on labor reallocation in developing countries for the period 1984 to 2006. The coefficients of wage differentials become insignificant, however, after the variable was instrumented. In addition, we find strong complementary effects between institutions and wage differentials in affecting labor reallocation. These results strongly support the hypothesized conjecture that institutions, social stability and openness have first-order effects on labor reallocation, and that labor reallocation directly affects the industrial cost of labor and productivity growth. As a corollary, we succeed in building a channel--labor reallocation--through which the institutional factors make a significant contribution to the international variation in productivity growth.
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