A development model of a dualistic economy. The Italian case

The problem of economic dualism has been much studied in works on developing countries, and much attention has also been dedicated to the phenomenon of backward areas within developed economies. But careful studies of advanced dualistic economies are rare. In fact, such a dualism is often analyzed on the basis of the findings of the theory of economic underdevelopment or studies on backward areas, which inevitably neglect some central peculiarities of advanced dualistic economies. The situation is highly unsatisfactory, since advanced sectors are now achieving significant dimensions in an increasing number of developing countries. Italy constitutes one of the best instances of an advanced dualistic economy and thus offers ideal material for investigating this case. The macrodynamic model explored here focuses mainly on the impact of the dualistic character of the Italian economy on the labor market, inflation, the process of capital formation and its cyclical behavior. The model probably goes beyond the Italian experience and describes the supply and demand for goods, the distribution of income, the balance of payments on current accounts and the current account budget of the public sector. It refers to a historic period (30 years ago) during which dualism operated strongly. Quantitative and qualitative analyses have been carried out on the model. This has been estimated as a continuous time model, using the full information maxi-mum likelihood method (FIML). We have also analyzed its stability properties and its predictive performance and performed some experiments of sensitivity analysis