Economic Development and Surplus Labour: A Critical Review of the Lewis Model

Posted: 21 May 2009

See all articles by Xiaobing Wang

Xiaobing Wang

The University of Manchester - Economics - School of Social Sciences and Centre for Chinese Studies

Jenifer Piesse

University of Stellbosch; King's College London - Department of Management

Date Written: May 21, 2009

Abstract

The Lewis dual economy model is widely recognised in development economics for its profound explanatory power and applications in economic development. However, there remain some confusions and ambiguities, especially with respect to the definition of surplus labour and the wage determination mechanisms in both the traditional and modern sectors. This has prohibited its use, especially in empirical studies. This paper clarifies and extends this theory. Several questions are addressed. Firstly, it defines two types of surplus labour. Second, it considers the pattern of production and of population growth in the traditional agricultural sector to define the subsistence level of consumption. Third, it considers two wage determination mechanisms in the modern sector, which are then applied to the relationships between these mechanisms and labour market restrictions. Fourth, the role of agriculture and food supply is discussed. Fifth, it considers the dynamics of surplus labour and labour transfer, and defines two types of turning points, which have important implications for empirical studies. Sixth, a scenario for urban surplus labour is presented. In summary, the paper seeks to enhance the general level of understanding of the Lewis model and its application to the process of economic development.

Keywords: Economic development, Dual economy model, Surplus labour

Suggested Citation

Wang, Xiaobing and Piesse, Jenifer, Economic Development and Surplus Labour: A Critical Review of the Lewis Model (May 21, 2009). Available at SSRN: https://ssrn.com/abstract=1408053

Xiaobing Wang (Contact Author)

The University of Manchester - Economics - School of Social Sciences and Centre for Chinese Studies ( email )

Arthur Lewis Building
Oxford Road
Manchester, M13 9PL
United Kingdom

Jenifer Piesse

University of Stellbosch

Stellenbosch, Western Cape
South Africa

King's College London - Department of Management ( email )

Virginia Woolf Building
22 Kingsway
London, England WC2B 6NR
United Kingdom

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