Lectnotes 8 Econ175a

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)

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]

Application: Why China Grows So Fast ,[object Object],Source: Amiti and Freund, “An Anatomy of China’s Export Growth”.

Lectnotes 8 Econ175a

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Lectnotes 8 Econ175a