A Dual Economy Model:Based On Heterogeneous Workers And Minimum Living Wage Constraint

The theory of dual economy has been one of the most important theories in Development Economics during improved for decades. However, most dual economy models consider labor as homogeneous; the only difference among workers is rural and urban. These assumptions may ignore that less developed countries exist a significant number of workers who are illiterate or semiliterate, these workers are paid by minimum living wage because they can only get this level wage.This article’s assumption is based on heterogeneous workers which abilities among workers are difference, besides, the article also consider variable minimum living wage constraint. After that this article set up a dual economy model based on these assumptions. Analysis on the model finds out that, if the model doesn’t include the epigenetic factors except population growth, the process of industrialization will be stagnated, or failure, in another word. The further analysis finds out that the process of industrialization may be successful when technical level or worker’s ability introduced into the model, while the new endogenous variables improve high enough. But the technical progress can not improve workers’ conditions efficiently since it can not prevent the minimum living wage rise. On the other hand, the enhancement of workers’ ability could make their conditions better as well as the success of industrialization. Nevertheless, workers with poor abilities may not have chance to improve their abilities, which makes polarization of wealth among workers.