Lewis Dual Sector Model
This famous West Indian economist felt that productivity was central
to the development of an economy.
This was best achieved by encouraging
migration of workers from the less productive sectors of the economy,
for example agriculture, which is traditional, into the newer
industries of manufacturing and the tertiary sector. The latter would
be more productive and so accumulate greater wealth.
In turn, this would generate greater funds for government through taxation, and enable them to spend on the essentials of development. Savings would be encouraged as rates of return would increase. Lewis felt that the marginal productivity of a rural worker was low.
However, the Lewis model also has problems which include the following:
- As increasing rural-urban migration takes place, a more unequal distribution of income is caused, as the rural migrants initially join the ranks of the urban poor.
- The idea that the productivity of labour in rural areas is almost zero may be true for certain times of the year. However, during planting and harvesting, the need for labour is critical to the needs of the rural areas.
- The assumption of a constant demand for labour from the industrial sector is questionable. Increasing technology may be labour saving, reducing the need for labour. In addition, if the industry concerned declines, again the demand for labour will fall.
- The idea of 'trickle down' has been criticised. Will higher incomes earned in the industrial sector be saved? If the entrepreneurs and labour spend their new found gains rather than save them, funds for investment and growth will not be made available.
- The rural urban migration has, for many LDCs, been far larger that the industrial sector can provide jobs for. Urban poverty has replaced rural poverty.
- The model ignores the cost of training and educating the surplus labour from the rural sector, who need to be equipped with new skills to work in the urban sector.