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Abstract
The role of capital formation in the process of economic development
has been critically appraised by economists and policy-makers. 1 Identifying
sources of capital and regulating the rate of capital growth are essential
tasks of economic planning in developing nations. Economic growth
models, particularly two-sector models, have been developed to describe the
process of economic transformation with domestic savings and investment as
the key driving forces in achieving a successful growth path. The
analytical abstractness of two-sector models, however, does not provide a
very accurate portrayal of peasant economic behavior, particularly savings
and investment decisions. This weakness has prompted several writers to
call for a more comprehensive approach in analyzing the structure of and
advocating policy for developing nations. 2