Questions based on readings Assignment Example | Topics and Well Written Essays - 2000 words

Questions based on readings - Assignment modellingXcolonia is a country that has a comparative advantage in agriculture and textiles (Krugman et al. 55). Machinery production requires complex technology, which Xcolonia does non have. Easy export substitution would, therefore, be the best strategy for Xcolonia, where they export agricultural and textile products, and this volition speed up industrialization. This strategy will help Xcolonia to create profits and reduce their debts. It will in all case trigger the productivity that will result to increased exports and greater efficiency.2. By unlimited agitate supplies the labor, the labor minister means that the labor return in Xcolonia exceeds the labor demand. Thus is a characteristic of many small developing countries, where there is a labor surplus. However, most of this labor is unskilled and this may quash the growth since technical progress necessary for growth requires skilled labor. The Lewis-Ranis Fei model suggests that the economic growth command place if agricultural laborers are transferred to the industrial area, where their productivity would increase (Williamson et al., 44). This design is based on the precondition that the economy of concern is dual with a stagnant agricultural sector and a dynamic industrial sector. Therefore, at the point where marginal productivity equals zero, labor can be transferred to the industrial sector without any loss in agricultural sector. In the first stage of the model, there is disguised unemployment because the labor supply is perfectly elastic, and the marginal productivity of labor is zero. This disguised unemployment is transferred to the industrial sector at the constant institutional wage (Fort and Ricardo, 27). Due to the constant institutional wage, the labor supply curve is horizontal at this stage. However, this does not last forever. This can be shown using diagram 1.3. Land is a major factor of production, and an substantial asset for the rural and urban poor. It provides a