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Extra resources for Appropriate Technologies for Third World Development: Proceedings of a Conference held by the International Economic Association at Teheran, Iran

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4 0n this see Dasgupta and Stiglitz (1974) and Diamond and Mirrlees (1976). 5 0n this, see Weitzman (1974). 20 Appropriate Technologies for Third World Development projects in the presence of widespread distortions are hard to locate. Nontraded produced commodities present particular difficulties. In many ways the simplest prescription that has been put forward is the 'decomposition method'. 1 The idea here is to trace a marginal unit of a non-traded produced commodity entirely to the amounts of traded commodities that are involved in its manufacture.

If the invisible hand cannot be relied upon to sustain the appropriate technology it is plainly of importance to analyse in detail those markets that are judged to be particularly imperfect. If the earlier development theorists displayed an unusual interest in the foreign exchange market in developing nations, the more recent ones have revealed an obsession with the labour market. In the following section I shall attempt to survey the literature bearing on the latter and its implications on the question of appropriate technology.

Wf Using equations (4) and (5) in equation (2) yields Lr). w = Yf{Lc) (\~u (6) Since w is constant it is readily calculated from (6) that (7) the supply elasticity oflabour from the rural sector. Equation (7) yields the direct opportunity cost oflabour, z, for this economy. Since Tlf ~ 0, one has z ~ w. e. the supply curve is horizontal), w = z. The logic behind this last rather startling result is, of course, clear enough. Given the unemployment ratio, u, for every worker hired in the urban sector, 1/u workers from the rural sector migrate.

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