Lewis Model And China:
The Lewis Model has proved successful for China, India grapples with its implementation, encountering challenges in the transition from agriculture to industrialization.
- Also, as manufacturing trends towards higher capital intensity, India contemplates shifting to a ‘farm-as-factory’ labor model in response.
- In 1954, economist William Arthur Lewis put forth the “Economic Development with Unlimited Supplies of Labor”.
- For this work Lewis won Nobel Prize in Economics in 1979.
- The model suggested that surplus labor in agriculture could be redirected to the manufacturing sector by offering wages just high enough to attract workers away from the farm.
- This shift, in theory, would stimulate industrial growth, enhance productivity, and lead to economic development.
- The model’s application in China was successful. Leveraging surplus rural labor and demographic advantages, China employed a dual-track system merging market forces with state planning.
- This strategy attracted foreign investment, boosted exports, and nurtured domestic industries.
- Extensive investments in infrastructure, education, and research and development enhanced China’s productivity and competitiveness, resulting in rapid industrialization, poverty reduction, and a substantial transformation of the economy.