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Criticism of Lewis Model

This document summarizes criticisms of Lewis' two-sector model of economic development. It notes that the model assumes: 1) proportional growth between modern sector capital accumulation and labor transfer, 2) surplus rural labor when recent studies find minimal surplus, 3) continuous real urban wages until rural labor is depleted, and 4) diminishing instead of increasing returns in industry. While the model has limitations, it remains useful for conceptualizing development processes and student engagement, as China's experience aligns with some assumptions around agricultural labor absorption and wage growth. Overall, the model requires revisions to assumptions to reflect most developing countries' realities.

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aubrey ledesma
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558 views1 page

Criticism of Lewis Model

This document summarizes criticisms of Lewis' two-sector model of economic development. It notes that the model assumes: 1) proportional growth between modern sector capital accumulation and labor transfer, 2) surplus rural labor when recent studies find minimal surplus, 3) continuous real urban wages until rural labor is depleted, and 4) diminishing instead of increasing returns in industry. While the model has limitations, it remains useful for conceptualizing development processes and student engagement, as China's experience aligns with some assumptions around agricultural labor absorption and wage growth. Overall, the model requires revisions to assumptions to reflect most developing countries' realities.

Uploaded by

aubrey ledesma
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Criticism of Lewis Model

1. The model implies that the rate of modern sector labor transfer and
employment growth is proportionate to the rate of modern sector capital
accumulation.
2. In rural areas, there is an excess of labor, whereas metropolitan areas
have full employment. According to the majority of recent studies, there is
minimal surplus labor in rural areas.
3. The third questionable premise is the notion of a competitive modern-
sector labor market that ensures the continuous existence of steady real
urban wages until the supply of rural surplus labor is depleted.
4. The fourth issue with the Lewis model is that it assumes diminishing
returns in the contemporary industrial sector yet there are pieces of
evidence that posit the increasing returns in that sector.

Why do we still need to discuss Lewis two-sector model?

Even if the Lewis two-sector model may not be appropriate to everyone,


many development specialists continue to conceptualize development because
it helps students engage in the arguments especially  the model is commonly
deemed applicable to recent experiences in China, where agricultural labor has
been rapidly absorbed by the manufacturing sector, as well as a few other
nations with comparable growth patterns. The Lewis turning point, where the
manufacturing wages begin to increase, has been widely associated with China's
wage growth. So, despite its disadvantages, it still requires substantial revision in
assumptions and analysis to meet the reality of the majority of modern
developing countries.

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