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Arthur Lewis's dual-sector model of development.

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By Oytun Pakcan Arthur Lewis's dual-sector model of development is based on the expansion of the modern sector of the economy while the indigenous sector contracts through the interaction and reallocation of resources between an advanced 'capitalist' sector and an agricultural 'non-capitalist' sector in a developing economy. However before Lewis introduces his dual-sector model, he makes a couple of significant assumptions that helps us to understand his model. First of all Lewis assumes that a capitalist sector with necessary ability and motivation to undertake long-term productive investment is present in all the developing economies. According to Lewis, the capitalist sector is defined as that part of the economy that uses reproducible capital, pays capitalists for the use thereof, and employs wage-labor for profit making purposes. The second assumption that the Lewis makes is that there is disguised unemployment in the non-capitalist agricultural sector of the economy. K. Sen explains that unemployment can be 'disguised' as a result of a particular task being performed by more labor than is necessary keeping the technology and productive resources constant. He gives the example that a piece of land that can be cultivated fully by two, may actually be looked after by four, if a family of four working people having no other employment happens to own it. ...read more.


Earlier we have been introduced to five different ways how agricultural sector contributes to an economy's development and industrialization: 1) by supplying foodstuffs and raw materials to other expanding sectors in the economy; 2) by providing an 'investable surplus' of saving and taxes to support investment in another expanding sector; 3) by selling for cash a 'marketable surplus' that will raise the demand of rural population for products of other expanding goods; 4) by relaxing the foreign exchange constraint through exports or by saving foreign exchange through import substitution 5) by supplying constant supply of labor to the expanding sectors. Different policy choices such as extension policy, taxation policy and agricultural pricing policies are shaped towards the agricultural sector of the economy according to the different priorities given by different experts to the five contribution ways above. Rostow focuses on the stages of economic growth and he believes that certain prerequisites are required in order to move from one stage of economic growth to the other. He emphasizes the role of technology and a vital need for an agricultural revolution to be able to create a modern industrial sector. He points out that in order to create a modern industrial sector, a flow of labor and food surplus is necessary from agricultural sector to the modern industrial sector. ...read more.


They argue that although technological advancement can occur in the long run, it is not a necessity for a short term development policy. As a result, they are not in favor of an expansion policy. In conclusion, after examining the priorities and agricultural policies of the five different economic development experts, Lewis, Rostow, Gershenkron, Sen and Nurske, it is not very hard to see that all these scholars had some degree of an urban bias. Although, Rostow and Gerschenkron emphasized some kind of a technological advancement and an agricultural revolution in the rural sectors of the economy, all five of the scholars were mainly focused on urban development and industrialization in modern sector. During the specific historical time we are looking at, concentration on urban development, harsh agricultural policies geared towards agricultural sector and neglect of rural areas have pushed resources away from activities where they could help growth and benefit of the rural poor. As Michael Lipton points out that the most important class conflict in the poor countries of the world even today is between the rural classes and the urban classes. The rural sector contains most of the poverty, and most of the low-cost sources of potential advance; but the urban sector contains most of the articulateness, organization and power. And unfortunately the inequality and gap between the rural and the urban sector has been growing each day... ...read more.

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