| This study investigates the likely effects of sustained shifts in fiscal policy on the structure and growth of a dualistic economy--with a focus on Swaziland's urban employment, sectoral production and rural-urban migration. It begins with an analysis of the historical origins and contemporary form of Swaziland's dualism within agriculture, and between agriculture and non-agriculture.;Due to data limitations, the model is estimated equation by equation. On the basis of a series of tests it is found to be plausible. A simulation exercise is then undertaken wherein fiscal instruments are changed and the resulting solution set compared with that corresponding to the actual fiscal regime prevailing over 1968-78.;There are four major results from the simulations. First, shifts in fiscal policy are likely to significantly alter sectoral structure. Second, to raise the urban employment rate and sectoral production (particularly on the communally-owned component of agriculture), appropriate fiscal policy options are: introducing an urban wage-subsidy, raising the share of public investment allocated to agriculture, reducing the rate of public consumption, raising average effective taxation on urban incomes, or raising average effective indirect taxation. Third, re-gearing industrial tax concessions away from capital into labour is likely to raise not only the urban employment rate, but also sectoral production. Finally, a fiscal re-distribution of economic surplus created in non-agriculture is likely to be more successful in accelerating development than reliance on the "trickle down" effects of growth.;This is followed by a literature review which focuses on the main features of the pioneering dual-sector models and the direction of subsequent theoretical and empirical research. It is found that although the literature is quite extensive and treats various aspects of development to various degrees of sophistication, it does not seem to give adequate and explicit treatment of the public sector. The forty-seven equation model formulated for the present study attempts to remedy this through a set of relations describing public sector activities in a dualistic framework, including the explicit incorporation of fiscal instruments in a number of behavioural functions. |
