jnu

[neha:)]

In Lewis' model of growth in dual economy, the rate of growth of money wage rate in modern sector is:
a. zero
b. constant
c. equal to rate of inflation
d. determined by rate of growth of labour force
e. none of the above

Is the answer B or D?

[The Villain]

It is b..

[Anjali]

Ron , until surplus labour is being transferred its constant , but we reach the stage of commercialisation , it starts increasing , because if it won't then the labours will not migrate from agri to industry . Iam not sure . What's your take ?

[positiva93]

Yes Anjali I too followed your line of thinking...so it must be
d. determined by rate of growth of labor force?

[Anjali]

Not sure ! Both seems right .

[mrittik]

Relationship between the two sectors:

The primary relationship between the two sectors is that when the capitalist sector expands, it extracts or draws labour from the subsistence sector. This causes the output per head of labourers who move from the subsistence sector to the capitalist sector to increase. Since Lewis in his model considers overpopulated labour surplus economies he assumes that the supply of unskilled labour to the capitalist sector is unlimited. This gives rise to the possibility of creating new industries and expanding existing ones at the existing wage rate.

[mrittik]

so the answer is b

[jane]

shudn't it be (a)?.. as far as i remember, there is a constant wage rate in modern sector, which is higher than subsistence wage, but constant nonetheless.. and if wage rate is constant, shudn't the growth of wage rate be zero? i'm confused...

[mrittik]

thnaks for the reply....the key assumption is unlimited labor and u have taken account the wage at modern sector, not the subsistence sector...wage rate is high in modern sector in comparison to subsistence sector....but at the existing rate in modern sector it would be operative.....understood @jane?

[Anjali]

@ mrittik
But in Lewis model there are different phases . Which phase are we supposed to consider here ? Initially when surplus labour is moving to industry wage rate is constant. But on commercialisation , it increases in modern industry .

[mrittik]

qsn is asked for the sate where the modern sector can be operative and thriving....it is quite natural that wage level increased then it might be increased for only inflation....how do you define this? that's why the modus operandi is just the modern sector at its growing level....

[SoniaKapoor]

is b the ans...are you 100% sure?