Arthur Lewis's Model Of A Dual Economy

Invented by Arthur Lewis (1954), the focus of the Lewis model is the two principal sectors in which the economy operates in the framework of a dual economy. The first is the capitalist (C) sector and subsistence (D) sector that operates within the labour market dualism (Lewis, 1954). Both industries control a different part of the economy, and when combined, it complements each other almost perfectly. The capitalist sector manages reproducible capital and employs labour from the subsistence sector who does not utilise reproducible capital (Lewis, 1954). Due to the lack of capital, the output in the subsistence sector is lower and thereby is thought to be an unproductive sector while the capitalist is presumably to be of high productivity (Lewis, …show more content…
If the deficit of one sector must be equivalent to the surplus of another area (Business Insider, 2011), then it can be applied to the capitalist sector and rural sector respectively. Despite the technological advances of the capitalist region, it lacks the human resources to support its progression which can lead to an economic downturn as projects are abandoned, and investors are unwilling to continue its financial aid. Contrastingly, the small businesses in the rural areas do not produce sufficient output for an individual (Lewis, 1954). Hence, there is a migration of labour from the subsistence sector to the capitalist sector, and thus, increasing the urban production. However, the description fits more so for developing countries such as China, Vietnam and Cambodia where rural workers move to the capital area to seek …show more content…
Younger generations are more courageous in taking this economic leap and anticipate a higher return on the investment in migration as compared to older generations. Because investment in human capital produces a return for a longer duration which is similar to the investment in training, education and migration of young people (Schultz, 1961). To increase the working population in Japan, the government provided assistance to youths to develop their careers through vocational training and job placement services (ADBI, 2015). Training and developing youths may still take a long time, the older generations can still stay on in the workforce as an advisor. Japan’s last initiative is to extend and promote the employment of older workers, creating a space for all to work as per their abilities and wishes (ADBI, 2015). Henceforth, labour surplus does not solely originate from the agricultural sector but also through other means to balance the deficiencies in the capitalist