CONADEV

THE LEWIS MODEL

OF STRUCTURAL
ECONOMIC GROWTH
AND DEVELOPMENT
Baltazar. Cordero Sy. Pamati-an. Reserva. Reyes
OUR TOPICS AND HIGHLIGHTS

DISCUSSION Brief History

TODAY Assumptions of the Model

The Big Picture

Criticisms

Reflection
 A BRIEF HISTORY
LEWIS MODEL

Initially created by W. At the time, most workers Enumerated in his article

Arthur Lewis back in the were employed on the entitled "Economic

mid-1950s land, which is a limited Development with

resource, while labour Unlimited Supplies of

tend to increase Labor"

 A BRIEF HISTORY
LEWIS MODEL

Was later modified, formalized, and Served as the general theory of the

extended by John Fei and Gustav development process of the economies

Ranis in surplus-labor developing nations

back in the early 1960s-1970s

 RURAL OR URBAN OR
AGRICULTURAL INDUSTRIAL

ASSUMPTIONS SECTOR

The more traditional,

SECTOR

The more modern and

overpopulated, highly-productive
LEWIS MODEL subsistence sector sector
Labor-intensive Capital-intensive
production process production process
Low dependency on Higher marginal and
There is a dualistic economy, consisting
capital average productivity
of rural agricultural and urban
Low marginal and Higher average
manufacturing sectors
average productivity wages
Low average wages Technologically
Considerable advanced
unemployment Would attract workers
from the agricultural
sector
 The traditional agricultural sector was

ASSUMPTIONS assumed to be of a subsistence nature

(characterized by productivity, low incomes,
low savings and considerable
underemployment)
LEWIS MODEL The industrial sector was assumed to be
technologically advanced with high levels of
investment operating in an urban
environment.
Modern industrial sector would attract
workers from the rural areas.
The model assumes that the profits made by
capital owners are reinvested.
THE BIG PICTURE
 CRITICISMS

Capital investment is evidently not the only factor causing growth

Not all profits will be reinvested

The model perpetuates unequal distribution of income

The migration of rural population to urban sector, the supply of labor increases

and the competition among the job seekers pushes the wages down which

results in widening the income gap

Wages will not remain constant

 CRITICISMS

The number of workers required for agriculture varies seasonally

may cause a reduction in agricultural output

Migration of labor force from subsistence to capitalist sector is not so

easy as is pointed out in the Lewis model

Higher capitalist wage will not lead to the movement of surplus

labour from subsistence sector to capitalist sector

REFLECTION
LEWIS MODEL

SERVES AS ONE OF THE MOST INFLUENTIAL MODELS USED IN DEVELOPMENT

ECONOMICS

WHAT SEPARATES LEWIS’S MODEL FROM OTHER ECONOMIC MODELS IS ITS

FOCUS ON SURPLUS LABOR AS ITS CENTRAL ELEMENT
THE WORLD IS CONSTANTLY EVOLVING, AND WITH THAT, MODELS AND
THEORIES ALSO NEED TO BE CONSTANTLY MODIFIED AS TIME GOES BY.

NOT ONE OF THE FOUR MODELS CAN BE SEEN AS THE “MOST OPTIMAL” DEVICE
TO ANALYZE THE GROWTH OF ANY COUNTRY’S ECONOMY.

MULTIPLE MODALITIES THAT ONCE CAN USE TO PROPERLY DISCUSS THE

REALITIES OF A COUNTRY’S DEVELOPMENT PROCESS.
LEWIS MODEL OF ECONOMIC DEVELOPMENT REMAINS RELEVANT TO
DEVELOPING COUNTRIES TODAY FOR UNDERSTANDING THE PROCESS OF
STRUCTURAL TRANSFORMATION OR LONG RUN ECONOMIC DEVELOPMENT.
Lewis Model of Economic
Growth and Development
BALTAZAR. CORDERO SY. PAMATI-AN. RESERVA. REYES