Theories of employment and developing economies

Abstract

"Theories of employment and developing economies" is an attempt to prove that the existing employment theories are not applicable to developing countries, and to propound a wage-goods gap theory as a suitable alternative for the expansion of employment opportunities in these countries. The study is based on the following four assumptions. Firstly, the model is more like a densely populated economy of the Asian type rather than a sparsely populated economy of the Latin American or of the African type. Secondly, as it is common to almost all developing countries, from 50 to 80 percent of the labour force in engaged in the agricultural sector comprising a vast magnitude of disguised unemployment. Thirdly, the terms "employment" and "output", and, for that matter, the terms "economic development" and "growth" have been used interchangeably. And finally, institutional factors have been assumed to be neutral in the sense that they do not [unreadable] any tendency toward expansion of employment or output. The study has been divided into three parts where each part is a logical development of the preceding part. Part I discusses the theories of employment as they exist without examining their validity in the context of the conditions prevailing in developing economies. In that sense, this part provides the raw materials which have been used for further analysis in Part II and Part III. Part II, which is also the theme of this paper, attempts to examine the relevance of these theories to the conditions of the developing economies and thereby to identify the points which are relevant and those which are not. Part III, which is a logical extension of Part II, examines the main thesis, that it is the shortage of real liquid capital and not of real fixed capital which is the main hurdle in the entire process of employment expansion in these countries. This part goes further to examine the recently experienced green revolution in some of the developing countries and its latent potentials for provided surplus wage-goods. The study concludes with a note of optimism so far as the chances of their success are concerned in their efforts to expand employment opportunities.