The Lewis Model

The Lewis Model, developed by economist W. Arthur Lewis in the 1950s, explains economic development in low-income countries. It divides the economy into two sectors: the traditional agricultural sector with low productivity and the modern industrial sector with high productivity. As economies grow, labor shifts from agriculture to industry, driving economic progress. The model highlights the importance of surplus labor in agriculture, which can support industrial growth without immediate wage increases. This transition is crucial for sustainable development and improved living standards in developing nations.