The dual and the exchange‐constrained economy

Nelson's model of the exchange‐constrained economy is compared with Eckaus's model of the dual economy. The purpose of this comparison is to illustrate the similarity of the models in explaining unemployment of one factor as the result of the composition of demand and the scarcity of a second factor. Both authors agree to this point. However, Nelson emphasises that unemployment arises from price rigidity while Eckaus maintains that technological limits of substitution are also important. Policy implications differ depending on whether Nelson's or Eckaus's assumptions are accepted. Currie has suggested that the redistribution of income may reduce unemployment in both circumstances.