Dual_economy

A dual economy is the existence of two separate economic systems within one country. Dual economies are common in less developed countries, where one system is geared to local needs and another to the global export market.

Dual economies need not be across economic sector boundaries. An example of a dual economy within the same sector is a modern plantation or other commercial agricultural entity operating in the midst of traditional cropping systems.

A dual economy involves two different sectors of a country growing at different rates.

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The Dual Economy

The wealth of nations comes from the business base that creates employment and builds the economy. Within most economies there are two sectors that produce a country\'s wealth. The first consists of older, often larger firms that account for much of the employment and GDP in the country. However, this sector, referred to as the \'managed economy\' is subject to market forces that cause these enterprises to eventually die. The offsetting part of the economy is the second sector the \'entrepreneurial economy\' that creates the new jobs and wealth and more than compensates for jobs lost by the managed economy. If the entrepreneurial growth is strong, then the economy as a whole prospers and grows.1

The marketplace is driven by the motivations of buyers, rather than some notion of supply and demand, which influences economic activity. These factors lead to a process of constant change. New products and services come into the market as a consequence of new needs and technologies. The persistent and pervasive push for betterment and improvement forces a life cycle process on to any service or product such that it moves through a number of stages from introduction, to growth to maturity to decline. The life cycle of the product or service becomes the life cycle of the enterprise as well unless the company re-invents its products or services, improves technologies and the facilities that produce the goods and services.

Entrepreneurship is the mechanism that creates the entrepreneurial sector in the economy. Studies in the US and Europe report that entrepreneurship has, and will continue to have, an accelerating effect on the economic future of nations and economies.2 Many developed nations accept that entrepreneurship is foremost in public policy initiatives,3 and that while the creation of jobs is important, entrepreneurs are also the source for knowledge and innovation too since the small firm, home of the independent entrepreneur and the independent inventor is the primary source of the technologies and the innovations that are the foundation for growth.4

The economics that define the economy are based on factors noted by Kirzner,5 for example, and leads to the development of a model that explains the dual economy. Applying market forces to the examination, a model of a dual economy is developed6 wherein the alpha economy, is a summation of all the entrepreneurial activities taking place. As the alpha type enterprise reaches maturity it has expands to its greatest size. It then experiences the effect of competition where it becomes a part of the managed economy, a beta enterprise. It begins to cut costs and employment through economies of scale and productivity and seeks ways of maintaining growth often by exporting to other nations. In time it becomes less competitive, less in demand and it passes from the scene.

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