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Structural Change, Wage Formation and Economic Growth in Low-Income Countries

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  • Bender, Dieter

Abstract

This paper analyzes the effects of structural change on the rates of growth of wages, employment and per-capita income in low-income countries, their dualistic structure shown by a Lewis-type two-sector model. Structural change is measured by the varying shares of sectoral employment in total employment. It is shown that the growth rates of GDP and per-capita income can be formulated as functions of these sectoral employment shares. Distinguishing the phases of dualistic development with and without labour surplus and post-dualistic development, it is demonstrated that each of these stages exhibits different growth dynamics: high but falling growth rates under dualistic development with labour surplus, low but rising growth rates under dualistic development after absorption of the labour surplus, growth rates falling again and converging toward a higher income steady state in the post-dual economy. As the growth dynamics of dualistic development are explained by a modified Lewis model and those of post-dualistic development by the Solow model, the study also highlights the complementary roles both models are playing in development economics.

Suggested Citation

  • Bender, Dieter, 2012. "Structural Change, Wage Formation and Economic Growth in Low-Income Countries," IEE Working Papers 194, Ruhr University Bochum, Institute of Development Research and Development Policy (IEE).
    • Handle: RePEc:zbw:ieewps:194
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    References listed on IDEAS

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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Chris Papageorgiou, 2002. "Technology Adoption, Human Capital, and Growth Theory," Review of Development Economics, Wiley Blackwell, vol. 6(3), pages 351-368, October.
    3. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    4. Oded Galor, 2011. "Unified Growth Theory and Comparative Development," Rivista di Politica Economica, SIPI Spa, issue 2, pages 9-21, April-Jun.
    5. repec:bla:rdevec:v:6:y:2002:i:3:p:351-68 is not listed on IDEAS
    6. Oded Galor, 2011. "Unified Growth Theory," Economics Books, Princeton University Press, edition 1, number 9477.
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    Cited by:

    1. Sadik-Zada, Elkhan Richard, 2023. "Resource rents, savings behavior, and scenarios of economic development," Resources Policy, Elsevier, vol. 81(C).
    2. Sugata Marjit & Ritwik Sasmal & Joydeb Sasmal, 2020. "Structural Transformation, Service Sector Growth and Poverty Alleviation: The Role of Formal–Informal Interaction and Rising Informal Wage," Review of Development and Change, , vol. 25(2), pages 151-168, December.
    3. Elkhan Richard Sadik-Zada, 2020. "Distributional Bargaining and the Speed of Structural Change in the Petroleum Exporting Labor Surplus Economies," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 32(1), pages 51-98, January.

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    More about this item

    Keywords

    Economic growth; Dualistic development; Labour surplus; Rural-urban migration;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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