Arthur Lewis

Definition

Arthur Lewis was a prominent economist known for his work on economic development and the Two-Sector Model, which analyzes the dynamics between traditional agriculture and modern industry. His theories have had a lasting impact on development economics, particularly in understanding how economies transition from agrarian to industrialized systems. Lewis's model provides a framework for examining labor movement, capital accumulation, and the role of surplus labor in driving economic growth.

5 Must Know Facts For Your Next Test

1. Arthur Lewis was awarded the Nobel Prize in Economic Sciences in 1979 for his contributions to the field of development economics.
2. His Two-Sector Model emphasizes the role of surplus labor from the agricultural sector being transferred to the industrial sector as a key driver of economic development.
3. Lewis argued that as economies grow, there would be a gradual decline in the share of agriculture in national income and an increase in industrial productivity.
4. The model suggests that initial growth can happen without significant capital investment due to the availability of surplus labor willing to work at lower wages.
5. Lewis's work has been influential in shaping policies for developing countries, emphasizing the need for structural transformation to achieve sustained economic growth.

Review Questions

• How does Arthur Lewis's Two-Sector Model explain the transition from agriculture to industrialization?
  • Arthur Lewis's Two-Sector Model explains this transition by highlighting the dynamics between the traditional agricultural sector and the modern industrial sector. It posits that surplus labor from agriculture can be absorbed into industry without affecting agricultural output significantly. As this labor moves into higher productivity jobs in industry, overall economic output increases, facilitating growth and development. The model underscores the importance of labor mobility and capital investment in achieving this structural change.
• Discuss how Lewis's concept of surplus labor impacts economic policy decisions in developing countries.
  • Lewis's concept of surplus labor plays a crucial role in informing economic policy decisions for developing countries. By recognizing that there is excess labor available in agriculture, policymakers can design strategies that promote industrialization while simultaneously improving agricultural productivity. This approach helps create jobs, stimulates economic growth, and reduces poverty. It emphasizes investment in infrastructure and education to facilitate labor mobility, ultimately leading to sustainable development.
• Evaluate the relevance of Arthur Lewis's Two-Sector Model in today's global economy, considering current challenges such as globalization and technological change.
  • The relevance of Arthur Lewis's Two-Sector Model in today's global economy can be evaluated through its application to contemporary issues like globalization and technological change. As economies continue to evolve, the model provides insights into how labor can transition between sectors amid rapid technological advancements. However, challenges such as job displacement due to automation and the impact of global supply chains necessitate adaptations of Lewis's framework. Understanding these dynamics remains crucial for developing effective policies that ensure inclusive growth while addressing modern economic complexities.

Related terms

Dual Economy: A concept that describes an economy with two distinct sectors: a modern industrial sector and a traditional agricultural sector, often with differing productivity levels.

Surplus Labor: Labor that is in excess of what is needed for production in the agricultural sector, which can be shifted to the industrial sector to stimulate economic growth.

Economic Development: The process by which a nation improves the economic, political, and social well-being of its citizens, often through industrialization and infrastructure development.