The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Labour Surplus Economies

  • Gustav Ranis
Reference work entry


In some sectors with a large endowment of unskilled labour and without sufficient cooperating land or capital, given technology and a wage level bounded from below, labour markets cannot clear. A full employment solution would drive remuneration below socially acceptable, possibly subsistence, levels of consumption. Consequently, a labour surplus exists in that much of the labour force contributes less to output than it requires: its marginal product falls below its remuneration, set by bargaining. A reallocation of such workers to other, competitive, sectors would eliminate the inefficiency and enhance total output. Open economy dimensions, extensions and critiques are dealt with.


Agriculture and economic development Arrow, K. Balanced growth Becker, G. Behavioural economics Dual economies Engel’s Law Family networks Informal sector Kuznets, S. Labour surplus Marginal productivity Minimum subsistence level of existence (MSL) Neoclassical economics Population growth Agricultural vs non-agricultural productivity Sen, A. Solidarity networks 

JEL Classifications

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Gustav Ranis
    • 1
  1. 1.