What is the core idea of the Lewis two-sector model in development economics?

What is the core idea of the Lewis two-sector model in development economics?

• A. The Lewis model argues that urban sectors must supply labor to agriculture.
• B. The Lewis model requires a balanced growth between all sectors.
• C. The Lewis model focuses only on capital markets.
• D. The Lewis model postulates surplus rural labor feeds into the modern industrial sector, enabling growth through higher productivity in manufacturing.

Answer: (D)

The main idea is that a large reserve of underutilized rural labor in agriculture can be absorbed into a growing industrial sector, fueling development. In the Lewis model, the rural sector has surplus labor with near-subsistence wages and low productivity. The modern industrial sector uses capital to hire these workers, paying them at subsistence levels at first, while profits from production are reinvested to expand manufacturing. As the industrial sector grows, it pulls more labor from the countryside without immediately raising rural wages, allowing continued capital accumulation and rising productivity in manufacturing. This combination—surplus rural labor feeding the modern sector and boosting manufacturing productivity—drives overall economic growth.

This differs from ideas that emphasize balanced growth across all sectors or a focus solely on capital markets. The essence is the flow of surplus rural labor into the modern sector and the resulting productivity gains in manufacturing.