Development and income distribution in a dual economy: A dynamic simulation model for Zambia

This paper discusses medium-term development prospects for Zambia. The analysis is carried out in terms of a modified dual economy model, suitably modified to capture a number of key aspects of the Zambian Economy. Mining is separated from other urban production and the rural sector is sub-divided into traditional, emergent, and commercial farming. Simulations are carried out on the basis of alternative governmental expenditure, investment, and taxation policies. Special attention is paid to sectoral employment and income distribution implications. In addition, the model is used to derive a number of shadow prices which would be used for project appraisal. These include the shadow price of government savings and a social discount rate.