Essay Title: The Lewis Model and its limitations: the critical assessment of its assumptions, logic and implications.

• Boms Onukwuru Rosytha

Introduction

This essay will discuss and critically assess the Lewis Model and its limitations, as well as its assumptions, logic and implications. This essay will start by defining economic growth and the purpose of development, and then a brief history of the Lewis Model will follow. Further, Lewis’ impact on the theory of development will be analysed before the conclusion.

The Lewis model is also known as the Dual–Sector model, the traditional and modern sector. In this essay, I will argue that the concept of surplus labour, wage determination and the mechanism of labour mobility are unclear. As a result of the model being unclear, its development could not move further, and this has prevented its use in empirical research. I will further argue that the Lewis model, despite its shortcomings, with respect to it being unclear still importantly informs our understanding of the development process because its emergence helped move the neglected sub-field of development economics far from price neglect (Ranis, 2004).

The strengths of this model far outweigh its weaknesses. However, it was important, despite it being unclear, as it was the first work ever on economic development, and other works have built on its existence.

Economic growth and the purpose of development

A few decades ago, economic development meant any planned alteration of economic activity and employment structure. As a result of this, agricultural production and employment declines, while services and manufacturing industries rise (Todaro and Smith, 2009). However, all development implies change. In this essay, development will describe the process of transformation, economically and socially, within countries. This process is a well organised sequence, and usually exhibits common characteristics (Thirlwall and Thirlwall, 2011). The purpose of development is to bring about an advanced positive change in an economy. Lewis contributed majorly to the advancement of growth theory to the development sub-phase and phases and through to the modern economic growth (RANIS, 2004).

Brief history of the Lewis model

The Lewis model of economic growth was developed by Sir W. Arthur Lewis in 1954. He was born in 1915 on the Island of St Lucia in the West Indies. He became a political economics tutor in different universities and in the 1950s he worked with the United Nations before pursuing his career at Princeton. He was awarded a Nobel Prize for Economics in 1979, together with T.W. Schultz, for their work on development economics (Lewis, 1954).

Lewis’ most famous and influential contribution to economics is undoubtedly the 1954 paper on “development with unlimited supplies of labour”. One amongst many of the universities where he tutored was the University of Manchester. It was at Manchester where his path-breaking work on economic development emerged (Kirkpatrick and Barrientos, 2004). He called it a Dual-Sector model by categorizing an economy into a traditional and a modern sector. The traditional sector provided surplus labour to the modern sector and this process led to development stability and capital accumulation (Clunnies-Ross, 2009 pp 449). He focused mainly on labour reallocation and an organizational dualism, but less on product dualism (Hunt, 1989).