Development economics

Table of Contents

1. Topic pack - Development economics - introduction
2. 4.1 Economic development (notes)
3. 4.1 Economic development (questions)
4. 4.2 Measuring Economic Development (notes)
5. 4.2 Measuring development (questions)
6. 4.3 The role of domestic factors in economic development (notes)
7. 4.3 The role of domestic factors in economic development (questions)
8. 4.4 The role of international trade (notes)
9. 4.4 The role of international trade (questions)
10. 4.5 The role of Foreign Direct Investment (FDI) (notes)
11. 4.5 The role of foreign direct investment (questions)
12. 4.6 The role of foreign aid and multilaterial development assistance (notes)
13. 4.6 The role of foreign aid and multilateral development assistance (questions)
14. 4.7 The role of international debt (notes)
15. 4.7 The role of international debt (questions)
16. 4.8 The balance between markets and intervention (notes)
    1. Balance between markets & intervention (case studies)
    2. Strengths and weaknesses of market oriented policies
    3. Case study (1)
    4. Case study (2)
    5. Case study (3)
    6. Case study (4)
    7. Case study (5)
    8. Commodity agreements: intervening in the markets
    9. Cartel arrangements
    10. Case study (6)
    11. Case study (7)
    12. Case study (8)
    13. Case study (9)
    14. Harrod-Domar Growth Model
    15. Structural Change Model
    16. Dual Sector Model
17. 4.8 The balance between markets and intervention (questions)
18. Print View

Dual Sector Model

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.