Open AccessAn Extension Of Sen'S Model Of The Valuation Of Labour In Surplus Labour Economies
Author(s) -
A. P. Thirlwáll
Publication year - 1970
Publication title -
pakistan development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.154
H-Index - 26
ISSN - 0030-9729
DOI - 10.30541/v10i3pp.393-396
Subject(s) - economics , consumption (sociology) , unit (ring theory) , valuation (finance) , labour economics , wage , production (economics) , product (mathematics) , economic surplus , marginal product , microeconomics , market economy , welfare , social science , mathematics , geometry , finance , sociology , mathematics education
Professor A. K. Sen argues in his book Choice of Techniques1that if the objective of a surplus labour economy is to maximise growth,as opposed to the level of immediate output, and savings are suboptimal,labour drawn from the agricultural to the industrial sector should notbe regarded as 'costless' even though its marginal product may have beenzero. The reasoning is that while the marginal product of the labour maybe positive in industry, a low-shadow wage will cause consumption out ofmoney wages to increase more than production reducing the size of theinvestible surplus. If greater importance is attached to an additionalunit of saving than consumption, the transference of labour involves a'cost' in terms of extra consumption. The cost of a unit of labour isequal to the extra consumption induced by an extra unit of employment.The increase in consumption is given by [3, p. 54]: