Chat with AIExam 4: Contemporary Models of Development and Underdevelopment
The big-push theory argues that coordination failures may arise because of
(35) 
VerifiedA
Explain how relatively high wages in the modern sector,as compared to the traditional sector,can lead to a coordination failure.
(43) 
Answered by Examlex AI CopilotRelatively high wages in the modern sector, as compared to the traditional sector, can lead to a coordination failure for several reasons.
Firstly, when wages in the modern sector are significantly higher than those in the traditional sector, it can create a strong incentive for workers to leave the traditional sector and seek employment in the modern sector. This can lead to a shortage of labor in the traditional sector, which may result in a decrease in productivity and output.
Secondly, the migration of workers from the traditional sector to the modern sector can also lead to a mismatch in the skills and expertise required in each sector. Workers who were previously engaged in traditional activities may not have the necessary skills or training to be successful in the modern sector, leading to inefficiencies and reduced productivity.
Additionally, the concentration of labor in the modern sector can lead to an oversupply of workers, which can drive down wages and create unemployment. This can further exacerbate the coordination failure as workers in the traditional sector may be unable to find alternative employment opportunities.
Furthermore, the imbalance in wages between the two sectors can also lead to social and economic disparities, as those working in the traditional sector may feel marginalized and undervalued compared to their counterparts in the modern sector. This can lead to social unrest and a lack of cohesion within the labor force.
In conclusion, the disparity in wages between the modern and traditional sectors can lead to a coordination failure by causing labor shortages, skill mismatches, unemployment, and social disparities. It is important for policymakers to address these issues through measures such as skill development programs, labor market reforms, and efforts to promote inclusive growth.
The O-ring theory places emphasis on
(33) VerifiedB
In contrast to the earlier neoclassical models of economic growth,in endogenous growth models,there is more emphasis on
(27) Explain what is meant by the term coordination failure and provide an example.
(36) Explain how the government can help the economy avoid a coordination failure.
(34) What three factors distinguish models of endogenous growth from their neoclassical counterparts?
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