A dual economy consisting of a manufacturing sector (M) and an agricultural sector (A) is depicted in the figure below. OMOA is the total labour available in the economy of which OMLSM is the labour supply in the manufacturing sector before any migration was allowed among the labourers. The vertical axis in the left (right) side measures the wage in the manufacturing, WM (agricultural, WA) sector. LDM (LDA) is the demand of labour in the manufacturing (agricultural) sector with respect to OM(OA) as the origin. If wages are flexible, and labour is allowed to migrate between these two sectors, then it will be TRUE that
- Total amount of labour that will migrate from the agricultural sector to the manufacturing sector will be LALSM
- Total amount of labour that will migrate from the manufacturing sector to the agricultural sector will be LSMLA
- The wage in the manufacturing sector will be W3
- The wage in the agricultural sector will be W1
The Correct Option is A
Solution and Explanation
In a dual economy with two sectors, manufacturing (M) and agricultural (A), workers migrate between these sectors based on wage differences. The initial separation of labor is OMLSM for manufacturing before migration is allowed.
When migration is allowed, wages will adjust between the sectors due to differences in labor supply and demand. The labor will migrate to a sector where higher wages are initially offered until the wages equalize between sectors.
In this scenario, consider the demand for labor (LDM and LDA) in both sectors, with the wage rates WM and WA.
As labor migrates from one sector to another, this process leads to wage equalization. Given the nature of the question and the options, the conclusion is that labor migrates from the sector with lower wages (agricultural) to higher wages (manufacturing) until an equilibrium is reached.
Thus, the correct assertion is:
Total amount of labor that will migrate from the agricultural sector to the manufacturing sector will be LALSM.
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