Intersectoral terms of trade, industrial labor supply, and the classical model : early Japanese experience

Discussion of the classical model of the development process, emphasizing the impact of a rise in the price of agricultural relative to industrial goods on the supply of labour to the industrial sector. It is shown that this model hypothesizes that as the terms of trade turn against industry, the supply of labour to the modern sector decreases and the real wage in this sector must, ceteris paribus, rise. Subsequently the criticisms to this model developed by Oshima (1981) and Ho (1972) are discussed, to be further developed into an alternative hypothesis. (Economische Voorlichtingsdienst)