Surplus labour and economic efficiency in the traditional sector of a dual economy: The Guatemalan case

In this paper we present empirical evidence on two closely related and widely discussed theoretical issues in development economics:

(A) the sign and the magnitude of the marginal productivity of labour—as they relate to the existence of surplus labour in the traditional sector of dual economies, and

(B) the economic efficiency of farmers in traditional agriculture. With regard to (A) we found the marginal productivity of labour in the traditional sector of Guatemalan agriculture to be positive, but considerably lower than the average wage rate that prevails in the area. Regarding (B) our estimated indexes of efficiency indicate that farmers in the traditional sector of Guatemalan agriculture make inefficient use of their economic resources.