The Lewis Dual Sector Model, proposed by economic anthropologist W. Arthur Lewis, is a development theory that divides economies into two sectors: a capitalist, modern sector and a traditional, subsistence sector. The model’s central figures include surplus labor in the traditional sector, the notion of a “turning point” where surplus labor is exhausted, the creation of a “reserve army of labor” in the modern sector, and the role of technological advances in the transition between sectors.
The Lewis Dual Sector Model: An In-Depth Look at Its Structure
The Lewis dual sector model is an economic model that divides the economy into two sectors: a traditional, low-productivity sector and a modern, high-productivity sector. The model was developed by Arthur Lewis in 1954, and it has been used to explain the process of economic development in many developing countries.
Key Concepts of the Model
- Traditional Sector: The traditional sector is characterized by low levels of productivity, low wages, and a surplus of labor. Workers in this sector typically engage in agriculture, subsistence farming, or other traditional activities.
- Modern Sector: The modern sector is characterized by high levels of productivity, high wages, and a demand for labor. Workers in this sector typically work in factories, offices, or other modern industries.
- Wage Gap: The model assumes that there is a significant wage gap between the traditional and modern sectors. This wage gap encourages workers to migrate from the traditional sector to the modern sector in search of higher incomes.
- Labor Surplus: The traditional sector is assumed to have a surplus of labor, meaning that there are more workers than jobs available. This surplus of labor keeps wages in the traditional sector low.
- Capital Accumulation: The modern sector is assumed to be capital-intensive, meaning that it requires a significant amount of capital to operate. Capital accumulation is the process by which businesses invest in new equipment, buildings, and other assets to increase their productive capacity.
Wage-Push Model
The wage-push model is a variant of the Lewis dual sector model that focuses on the role of wages in the development process. According to this model, the wage gap between the traditional and modern sectors encourages workers to migrate from the traditional sector to the modern sector. This migration of labor leads to an increase in the wages in the traditional sector, which in turn encourages more workers to migrate. The process of wage-push migration continues until the wage gap is eliminated.
Stages of Economic Development
The Lewis dual sector model outlines three stages of economic development:
- Traditional Stagnation: In this stage, the economy is dominated by the traditional sector. There is a surplus of labor in the traditional sector, and wages are low.
- Dualism: In this stage, the modern sector begins to grow, and the wage gap between the traditional and modern sectors widens. This encourages workers to migrate from the traditional sector to the modern sector.
- Convergence: In this stage, the modern sector becomes dominant, and the wage gap between the traditional and modern sectors narrows. The economy reaches a steady state where the migration of labor has stopped, and the wages in the traditional and modern sectors are equal.
Strengths of the Model
- The Lewis dual sector model is a simple and intuitive model that can be used to explain the process of economic development in many developing countries.
- The model highlights the importance of wage gaps and surplus labor in the process of economic development.
- The model can be used to make predictions about the path of economic development in a particular country.
Limitations of the Model
- The Lewis dual sector model is a simplified model that does not take into account all of the factors that can affect economic development.
- The model assumes that there is a perfect labor market, which is not always the case in reality.
- The model does not take into account the role of government policy in economic development.
Question 1:
What is the essential concept of the Lewis dual sector model?
Answer:
The Lewis dual sector model proposes the existence of two distinct sectors in a developing economy: a traditional subsistence sector and a modern capitalist sector.
Question 2:
How does the Lewis dual sector model explain the surplus labor in the traditional sector?
Answer:
According to the model, the traditional sector experiences diminishing marginal productivity, leading to a surplus of labor that can be absorbed into the modern sector without affecting wages in the latter.
Question 3:
What is the role of capital accumulation in the Lewis dual sector model?
Answer:
Capital accumulation in the modern sector creates incentives for workers to transition from the traditional sector, contributing to the growth and development of the economy.
Well, there you have it, folks! A quick and dirty dive into the ins and outs of the Lewis Dual Sector Model. Thanks for sticking with me through all the economese. I know it can be a bit dry at times, but I hope you found this helpful. If you’re looking for more economic adventures, be sure to check out my other articles. And don’t be a stranger! Swing by again soon for more money-making magic.