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The Lewis theory of development stated that the more I industrialize the more my per capita income would increase and the higher the growth rate of my economy. Assuming that if I shift to industrial development the above mentioned consequences would cause the shift or increase in agriculture development; therefore, my whole economy would grow or develop. Lewis assumed a few assumptions with this theory: first, is that I would have an unlimited supply of labor, where he assumed that there will always be disguised unemployment in the agriculture firm, land. Accordingly, we can take this extra labor supply and hire in industry. This assumption was based on the theory that most farms have a marginal labor productivity equals zero due to family working together; therefore having disguised unemployment. Secondly, the average productivity of labor is constant, which would only be true if his first assumption is true. If a whole family works together in a farm then there will be an equal distribution of profit or share even though some might have not worked at all. This would only happen if I have disguised unemployment. Thirdly, is that a country must have efficient productive entrepreneurs, they can make profit. And finally, lewis assumed that the labor's increase in wages would not be consumed. To further explain Lewis's theory it would take years, but lets just illustrate each point as we go through its opposition.
The theory might sound reasonable, yet simple, and might have reflected some of the west's strategic plans that has been made, such as some countries in Europe and also the United States. First of all is that Lewis's two sector model might satisfy country with high per capita income such as those of the west mentioned, but less developing countries such as Egypt and India would not get along with this due to their low per capita income. However, starting to evaluate the theory intimately, first, we would consider the surplus of labor assumption, disguised unemployment. The argument stated that I have extra workers than I need in agriculture so I will take them from agriculture to industry, from rural to urban, to change the marginal labor productivity from negative or zero to positive. To estimate this, they use an indirect method by stating the number of workers requires to do certain jobs.
Names mentioned in this term paper
Sir W. Arthur Lewis, Lewis, Michael P. Todaro,
Organizations mentioned in this paper
Locations talked about in this research paper
a republic, India, Europe, United States,
Keywords mentioned in this research paper
labor productivity, lewis, Egypt, industry, slack season, theory, skilled labor, labor force, agriculture sector, industrial development, entrepreneurs, wages, labor scarcity, resource, peak season, disguised unemployment, productive, agricultural, seasonal unemployment, poor countries, per capita income, high and low, agricultural sector, development economics, marginal cost, marginal revenue, sector model, industrial sector, first time, farm, income distribution, productive capacity, resource allocation, small, National Income, driving force, subsistence level, Economic growth, early stages, United States, underdevelopment, high technology, solutions, hard work, amount, industries, capitalists, extra, acre, industrialize,