The Lewis model, also known as the Lewis dual-sector model, centers on the idea that labor migration from a traditional, low-productivity agricultural sector to a modern, high-productivity industrial sector drives economic growth.
This model, developed by Nobel laureate W. Arthur Lewis in the 1950s, explains the economic development of many developing countries, particularly those transitioning from primarily agricultural economies to more industrialized ones.
The model assumes the existence of two sectors:
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Traditional Sector: Characterized by low productivity, surplus labor, and low wages.
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Modern Sector: Characterized by high productivity, capital-intensive production, and higher wages.
The key mechanism driving economic growth is the movement of labor from the traditional sector to the modern sector. This shift increases productivity and output in the modern sector, leading to:
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Higher incomes: Workers in the modern sector earn more than those in the traditional sector.
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Increased savings: Higher incomes lead to greater savings, fueling further investment and economic growth.
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Urbanization: The migration of labor to the modern sector contributes to urbanization.
While the model offers a simplified view of economic development, it provides a framework for understanding the role of labor migration in economic growth.
The Lewis model has been influential in development economics and continues to be relevant for understanding the challenges and opportunities faced by developing countries.
