W. Arthur Lewis

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Surplus labor remains an important idea in economic development, and he was the one who brought it back into economic theory.

 

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I think he meant the Caribbean.

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W. Arthur Lewis introduced a new model known as Dual Sector Model or Lewis Model (Giving credits to his name). The new model came with the idea of a combined analysis of economies. You can have a clear view of his ideas here:

"Lewis combined an analysis of the historical experience of developed countries with the central ideas of the classical economists to produce a broad picture of the development process. In his theory, a "capitalist" sector develops by taking labour from a non-capitalist backward "subsistence" sector. At an early stage of development, the "unlimited" supply of labour from the subsistence economy means that the capitalist sector can expand for some time without the need to raise wages. This results in higher returns to capital, which are reinvested in capital accumulation. In turn, the increase in the capital stock leads the "capitalists" to expand employment by drawing further labor from the subsistence sector. Given the assumptions of the model (for example, that the profits are reinvested and that capital accumulation does not substitute for skilled labor in production), the process becomes self-sustaining and leads to modernization and economic development.

The point at which the excess labor in the subsistence sector is fully absorbed into the modern sector, and where further capital accumulation begins to increase wages, is sometimes called the Lewisian turning point. It has recently been widely discussed in the context of economic development in China."

Source: Wikipedia - http://en.wikipedia.org/wiki/W._Arthur_Lewis

In modern economics, we may find it difficult to relate some of the ideas that Lewis contributed to the processes, but that time when he was introduced his theory, it became an instantly appreciated plan mainly for it's core values on economic aspects. He won the honorary Nobel Memorial Prize in Economics in 1979 to mark his sign clearly before the modern economists.

Hope it helps a bit to understand and have a general view on Dual Sector Model or Lewis Model.

Regards,
Robert Jarvis
Writer

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