A General Model of Derived Demand Linkages in a Dual Economy: Some Structural Implications

Abstract

A general model of derived demand linkages in terms of technological interdependence of both the segments - modern and traditional- of a dual economy is developed. After defining two types of (complementary) demand linkages - induced and diffused, the economic states of those segments are characterized either from production and price structures point of view or from consumption and cost structures point of view. The combinations of the economy-wide investment levels with either terms-of-trade or wage-inequality that give rise to the above states of the economy are identified under both lower and higher stages of development.