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Lewis Model And China

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.