Dual economy
Encyclopedia
A dual economy is the existence of two separate economic sectors within one country, divided by different levels of development, technology, and different patterns of demand. The concept was originally created by Julius Herman Boeke to describe the coexistence of modern and traditional economic sectors in a colonial economy.
Dual economies are common in less developed countries, where one sector is geared to local needs and another to the global export market. Dual economies may exist within the same sector, for example a modern plantation
or other commercial agricultural entity operating in the midst of traditional cropping systems. Sir Arthur Lewis used the concept of a dualistic economy as the basis of his labour supply
theory of rural-urban migration. Lewis distinguished between a low-income, rural, subsistence sector with surplus population, and an expanding urban capitalist sector. The urban economy absorbed labour from rural areas (holding down urban wages) until the rural surplus was exhausted.
A World Bank comparison of sectoral growth in Cote d'Ivoire, Ghana and Zimbabwe since 1965 provided evidence against the existence of a basic dual economy model. The research implied that a positive link existed between growth in industry and growth in agriculture. The authors argued that for maximum economic growth, policymakers should have focused on agriculture and services as well as industrial development.
Lewis, W.A. (1954) 'Economic development with unlimited supply of labour', The Manchester School.
Dual economies are common in less developed countries, where one sector is geared to local needs and another to the global export market. Dual economies may exist within the same sector, for example a modern plantation
Plantation
A plantation is a long artificially established forest, farm or estate, where crops are grown for sale, often in distant markets rather than for local on-site consumption...
or other commercial agricultural entity operating in the midst of traditional cropping systems. Sir Arthur Lewis used the concept of a dualistic economy as the basis of his labour supply
Labour supply
In mainstream economic theories, the supply of labor is the total hours that workers wish to work at a given real wage rate....
theory of rural-urban migration. Lewis distinguished between a low-income, rural, subsistence sector with surplus population, and an expanding urban capitalist sector. The urban economy absorbed labour from rural areas (holding down urban wages) until the rural surplus was exhausted.
A World Bank comparison of sectoral growth in Cote d'Ivoire, Ghana and Zimbabwe since 1965 provided evidence against the existence of a basic dual economy model. The research implied that a positive link existed between growth in industry and growth in agriculture. The authors argued that for maximum economic growth, policymakers should have focused on agriculture and services as well as industrial development.
Further reading
J.H. Boeke (1953) Economics and Economic Policy of Dual Societies, New York: Institute of Pacific Relations.Lewis, W.A. (1954) 'Economic development with unlimited supply of labour', The Manchester School.