The Micro-Economics of "Surplus Labour"

This paper examines the apparent conflict between the classical assumption of a bargaining agricultural sector wage and the neo-classical assumption of a competitive wage in the context of a labour surplus developing economy. It concludes that the relatively inelastic supply of labour hours offered by low income small or landless farmers in the static micro-economic leisure/work context is perfectly consistent with the persistence for some time of an institutional real wage offered to the non-agricultural sector of the dual economy. Empirical evidence is brought to bear in support of that position.