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Pioneer of development economics.

Article Excerpt
W. Arthur Lewis' best-known contribution to development economics was his path-breaking work on the transfer of labour from a traditional to a modern capitalist sector in conditions of unlimited supplies of labour. His article, "Development with Unlimited Supplies of Labour" (1954), contributed to the establishment of development economics as a specialized field of study. It addressed the mechanisms of transferring surplus labour from traditional activity to a modern capitalist sector under conditions of unlimited supply of labour.

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In this model, wages in the modern capitalist sector are not determined by the productivity of labour, but by its opportunity cost. A "traditional" non-capitalist working environment--variously comprised of peasants, artisanal producers and domestic servants--augmented by population pressures and the entry of women into the labour force, provides the capitalist sector with "unlimited supplies" of labour, at a wage somewhat above the subsistence level. As the sector expands, employment and output increase and the share of profits (savings) in national income rises. Eventually, as surplus labour is exhausted, the wage rate rises. At this point, the economy crosses the boundary, from a dual to a single integrated labour market, and real wages rise with increasing productivity, in accordance with conventional growth models.

Lewis' model showed that low wages and poverty in a labour surplus economy will persist so long as the opportunity cost of labour to the capitalist sector remains low. It also served as an argument for government-led industrialization programmes in the 1950s and 1960s, something Lewis argued...

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