Dual Structure in Japan :: essays papers

Dual Structure in Japan What do you understand by the term â€Å"dual structure of an economy†? How do you explain the dual structure of manufacturing industry in Japan? The word â€Å"dual† has the meaning of double, twofold or in two parts according to The Australian Oxford Dictionary (1996). Applying the word to an economic context, I would describe the term â€Å"dual structure of an economy† to indicate the co-existence of two different sectors alongside each other with disparities in technology and productivity between them. Take for instance, the existence of a traditional primary sector along with a modern non-primary sector constitutes to a â€Å"dual structure†. Duality can exist within a particular sector of the economy. The existence of traditional subsistence agriculture alongside export agriculture among the Southeast Asian countries during colonial period is an example of duality within a sector. Minami (1994, p.239) defined â€Å"dual structure† to mean the existence of two distinct sectors; one that has modern technology, a high capital-labour ratio, high labour productivity and wages, against another one, which has all the opposite characteristics. Therefore, one can infer that if large-scale industries with high capital intensity (K) were promoted at the stage in which labour supply (L) is relatively abundant then differentials in labour productivity (Y/L) and the wage rate would arise and lead to a dual structure. For Japan, three characteristics of the economy indicated the existence of a â€Å"dual structure†. First, the coexistence of a very low unemployment rates and continued low incomes in agricultural and small business. Second, the existence of large (â€Å"industrial giants†) and small scale firms within the manufacturing sector. Third, the existence of peculiar characteristics of the labour market such as enterprise unions, wages differentials according to the size of the firm and long term employment (Odaka, 1967 p.50). Furthermore, duality existed in the manufacturing sector too. In general, â€Å"dual structure† of the Japanese economy began before the Second World War as seen in a widening of income differential between agricultural and non-agricultural. The widening income differential was due to two main reasons. Firstly, productivity differential widen as productivity in the industrial sector increases faster due to relative ease in technology borrowing than productivity in agriculture. Secondly, the existence of surplus labour in traditional industries has tended to hinder increases in productivity due to limited arable land for agriculture so the farmland area per worker increased very slightly.