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Lectnotes 8 Econ175a

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Lewis two-sector model

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Introduction to Economics of Development Lewis Two-sector Migration Model
What’s Happening 03/06/08 ,[object Object]
Model Motivation ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Arthur Lewis (1915-1991)
Why is this significant?
The problem of surplus labor At point g and thereafter, MPL=0, with more labor working on the fixed amount of land, the more severe the surplus labor problem becomes. This results in lower labor productivity on average. MPL=0 In other words, everyone is not working at their full potential, or at least some of them are shading.
Supply & Demand of Labor in Industrial Sector ,[object Object],[object Object],[object Object]
Lewis Two-Sector Migration Model Dynamics L MPL/wage MPL/wage w Turning Point No more surplus labor migration
Application: Why China Grows So Fast ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],2001 Nobel winner
Application: Why China Grows So Fast ,[object Object],[object Object]
Application: Why China Grows So Fast ,[object Object],[object Object],HMT: Hong Kong, Macao, Taiwan Invested.
Application: Why China Grows So Fast ,[object Object],[object Object]
Application: Why China Grows So Fast ,[object Object],[object Object]
Application: Why China Grows So Fast ,[object Object]
Application: Why China Grows So Fast ,[object Object],[object Object]
Application: Why China Grows So Fast ,[object Object]
Application: Why China Grows So Fast ,[object Object],Source: Amiti and Freund, “An Anatomy of China’s Export Growth”.
Application: Why China Grows So Fast ,[object Object]
Application: Why China Grows So Fast ,[object Object]
Application: Why China Grows So Fast ,[object Object]

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Lectnotes 8 Econ175a

  • 1. Introduction to Economics of Development Lewis Two-sector Migration Model
  • 2.
  • 3.
  • 4. Why is this significant?
  • 5. The problem of surplus labor At point g and thereafter, MPL=0, with more labor working on the fixed amount of land, the more severe the surplus labor problem becomes. This results in lower labor productivity on average. MPL=0 In other words, everyone is not working at their full potential, or at least some of them are shading.
  • 6.
  • 7. Lewis Two-Sector Migration Model Dynamics L MPL/wage MPL/wage w Turning Point No more surplus labor migration
  • 8.
  • 9.
  • 10.
  • 11.
  • 12.
  • 13.
  • 14.
  • 15.
  • 16.
  • 17.
  • 18.
  • 19.