ABSTRACT
In traditional growth theory the typical assumption is made that workers have no preferences between varying occupations in the economy. A distortion can always be attributed to a differential of one sort or another but not every differential implies a distortion. The term distortion denotes that a differential has certain normative or welfare implications. The part explores the instantaneous equilibrium conditions for the fixed coefficient model in the presence of wage differentials. In the fixed coefficient model the impossibility of factor substitution implies that the transformation locus must coincide with the production frontier in spite of wage differentials. In the fixed coefficient model without wage differentials, if the relative demand curve is monotonic decreasing, equilibrium always exists and is unique. In all cases, whether indeterminacy is removed by some device like that of utility maximization or not, labour is not redundant in the long-run.
