Economics commentary - In the article, it mentioned that Chinas economic wonder was largely attributed to the Cheap and sufficient migrant laborers.

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Jim Lu H4 HL Economics


Development Commentary

The article discusses the consequences of rapid economic growth, namely urbanization. The Lewis model, or the dual sector model, is a model of growth that identifies urbanization, or a change in structure, as a pathway for a country to change from a sustenance agrarian based economy to a modern industrial manufacturing and service based economy. The theory models this transition and is based on the assumptions that there are two sectors in the economy: a large inefficient agriculture sector with labor surplus and a small but productive manufacturing sector. The wage level of the industrial sector in the cities will be higher than that of the sustenance agriculture thus attracting workers from the countryside. The theory also states that the industrial sector will then reinvest their profits into the industry, attracting more migration from the countryside to the city. This cycle is the cause of the rapid urbanization of China.

Figure 1 is a graph that shows the relationship between the quantity of labor (on the X axis) and the total productivity (on the Y axis) in the agricultural sector. It shows that with increasing amount of labor the total produce increases until it reaches a peak and declines. This shows that is the restricting land that restricts productiveness leading to a surplus of labor. The graph also shows another assumption of the theory which is that a decrease in the quantity of quantity of labor will have small change in the productivity of the agricultural sector.

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Figure 2 represents the change in average and marginal product in the industrial sector attracts labor from the countryside to the city.  ‘Wa’ represents the sustenance wage level.

Figure 3 and 4 demonstrates the effect of the industrial sector reinvesting its profits back into the industry. Figure 4 is the graph of the total production of the sector which increases each time the profits are reinvested. Figure 4 is the graph of the labor market of the industrial sector. The real wage stays constant despite constant increase in labor because of the constant reinvestment as represented by the ...

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