Growth in Dualistic Economies with a Rigid Food Supply

This chapter analyses the growth prospects of developing countries with a dualistic economy consisting of an important agricultural sector and a manufacturing sector, the growth of which is influenced by the price of food. Food supply in turn depends on various types of supply rigidities in agriculture, including those due lack of modernization (despite the fall in farm size), institutional factors, adverse terms of trade effects, and lack of incentive goods in the countryside. The chapter then discusses the Kalecki dual economy model that suggests that—in a closed economy—the rigidity of food supply is a source of rising food prices and overall inflation that may frustrate Keynesian expansionary policies to reduce unemployment in a demand-constrained manufacturing sector.