The Role of Agriculture in Economic Development: Classical versus Neoclassical Models of Growth

Abstract

As a branch of general economic theory, the theory of development of a dual economy is of very recent origin. As recently as five years ago the theory of economic growth consisted of two essentially unrelated parts— theories for an advanced economy and theories for a backward economy. One may characterize theories of development for backward economies as classical and theories of growth for advanced economies as neoclassical without accepting Lewis' viewpoint on neoclassical theory, namely: "When the labour surplus disappears our model of the closed economy no longer holds. The chapter presents a new version of the classical approach to the development of a dual economy. This version of the classical approach preserves the most essential features of Lewis' theory of economic development—namely an unlimited supply of labor at a fixed real wage.

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