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Unit-3 Growth and Structural Change

In this unit, we shall examine the theoretical and empirical evidence that explains the process of economic development by way of a certain pattern of structural change.

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What is the Fisher-Clark hypothesis of workforce shifts with growth? Why does labour force shift to industry?

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Written on Jun 26, 2019 1:24:30 PM

Fisher and Clark explain the reallocation of workforce during the period of modern economic growth. According to them, as economies developed there will be shift in the share of workforce initially from primary (agriculture) to secondary sector and later to the tertiary sector. The Fisher-Clark explanation can be presented in a graphical form. The main reasons offered for the shift in labour force to industry are: first, following Engel’s Law, as the incomes rise the demand for industrial products increase more than proportionally whereas the demand for food increase less than proportionally. In other words, the elasticity of demand for industrial products is higher, whereas, for food it is less. Second, the rate of growth of productivity in industry is faster which attracts more investment and employment.