2.1 Lewis Dual Sector Model of Economic Development
The Lewis Dual Sector model was proposed by Arthur Lewis in 1954 and has two main sectors: An agricultural/rural sector characterized by subsistence nature i.e. most of the agriculture produce are meant for own consumption rather than traded hence zero marginal productivity of labour, and an urban/industrial/manufacturing sector which has a high demand for labour force and offers higher wages than the ones being offered in the rural areas. Lewis assumed the rural/agricultural sector to be characterized by low wages, abundance of labour, low productivity and considerable underemployment. The model assumes that in the rural areas as labour increases the level of food output increases at a decreasing …show more content…
Harris and Michael Todaro as an economic model. It is used in development and welfare economics to explain certain issues regarding rural-urban migration. The Todaro model of migration treats rural-urban migration as primarily an economic phenomenon. Rural-urban migration is viewed as an individual rational decision driven mainly by rural-urban differences in expected wages rather than the actual income. Migrants consider the available labour market opportunities and select the one that will maximise their expected returns from migration.
“In essence the theory assumes that members of the labour force, both actual and potential, compare their expected incomes for a given time period in the urban sector (the difference between returns and costs of migration) with prevailing average rural incomes and migrate if the former exceeds the latter.” (Michael P. Todaro, Stephen C. Smith- Economic Development p. …show more content…
The model states that majority of the migrants are between the ages of 15 and 24 and the decision to migrate should be based on a longer term, with more permanent earnings taken into consideration. Todaro points out that “if the migrant anticipates a relatively low probability of finding regular wage employment in the initial period but expects this probability to increase over time as he is able to broaden his urban contacts, it would still be rational for him to migrate, even though expected urban income during the initial period or periods might be lower than expected rural income.” (Michael P. Todaro, Stephen C. Smith- Economic Development p. 339)
Therefore the decision to migrate would make sense as long as the present value of the net expected urban wage is exceeds expected rural wage given the migrants planning horizon. Rural urban migration as seen in the Todaro model equates rural and urban expected wages. Due to the fact that expected incomes are expressed in both wages and probabilities of securing employment terms, rural urban migration will continue despite having high rates of urban unemployment.
The Lewis Dual Sector model was proposed by Arthur Lewis in 1954 and has two main sectors: An agricultural/rural sector characterized by subsistence nature i.e. most of the agriculture produce are meant for own consumption rather than traded hence zero marginal productivity of labour, and an urban/industrial/manufacturing sector which has a high demand for labour force and offers higher wages than the ones being offered in the rural areas. Lewis assumed the rural/agricultural sector to be characterized by low wages, abundance of labour, low productivity and considerable underemployment. The model assumes that in the rural areas as labour increases the level of food output increases at a decreasing …show more content…
Harris and Michael Todaro as an economic model. It is used in development and welfare economics to explain certain issues regarding rural-urban migration. The Todaro model of migration treats rural-urban migration as primarily an economic phenomenon. Rural-urban migration is viewed as an individual rational decision driven mainly by rural-urban differences in expected wages rather than the actual income. Migrants consider the available labour market opportunities and select the one that will maximise their expected returns from migration.
“In essence the theory assumes that members of the labour force, both actual and potential, compare their expected incomes for a given time period in the urban sector (the difference between returns and costs of migration) with prevailing average rural incomes and migrate if the former exceeds the latter.” (Michael P. Todaro, Stephen C. Smith- Economic Development p. …show more content…
The model states that majority of the migrants are between the ages of 15 and 24 and the decision to migrate should be based on a longer term, with more permanent earnings taken into consideration. Todaro points out that “if the migrant anticipates a relatively low probability of finding regular wage employment in the initial period but expects this probability to increase over time as he is able to broaden his urban contacts, it would still be rational for him to migrate, even though expected urban income during the initial period or periods might be lower than expected rural income.” (Michael P. Todaro, Stephen C. Smith- Economic Development p. 339)
Therefore the decision to migrate would make sense as long as the present value of the net expected urban wage is exceeds expected rural wage given the migrants planning horizon. Rural urban migration as seen in the Todaro model equates rural and urban expected wages. Due to the fact that expected incomes are expressed in both wages and probabilities of securing employment terms, rural urban migration will continue despite having high rates of urban unemployment.