Lagged development and economic dualism

Abstract

The work explores the hypothesis that today’s lagging economies, such as Italy, are not completely lacking in firms that are capable of achieving high levels of productivity, rather they simply do not have enough of them to absorb a sizeable portion of the potential labour supply. To test this hypothesis the author presents evidence on the number and productivity of micro-firms in various countries. Problems of distribution raised by differences in levels of productivity are then dealt with. Finally, the author argues that advanced economies in a previous phase of development most likely did not face the problems of dualism that lagging economies do today. Thus, an appropriate development policy for lagging economies cannot be modelled on the one valid for advanced economies of today, or even those of yesteryear, but rather calls for ad hoc reflection. 

JEL: J24, O11, O52