Empirical Tests and Practical Application of The Lewis Model
- Empirical evidence does not always provide much support for the Lewis model. Theodore Schultz in an empirical study of a village in India during the influenza epidemic of 1918–19 showed that agricultural output declined, although his study does not prove whether output would have declined had a comparable proportion of the agricultural population left for other occupations in response to economic incentive. Again disguised unemployment may be present in one sector of the economy but not in others. Further, empirically it is important to know not only whether the marginal productivity is equal to zero, but also the amount of surplus labor and the effect of its withdrawal on output.
- The Lewis model was applied to the Egyptian economy by Mabro in 1967 and despite the proximity of Lewis's assumptions to the realities if the Egyptian situation during the period of study, the model failed firstly because Lewis seriously underestimated the rate of population growth and secondly because the choice of capital intensiveness in Egyptian industries did not show much labor using bias and as such, the level of unemployment did not show any tendency to register significant decline.
- The validity of the Lewis model was again called into question when it was applied to Taiwan. It was observed that, despite the impressive rate of growth of the economy of Taiwan, unemployment did not fall appreciably and this is explained again in reference to the choice of capital intensity in industries in Taiwan. This raised the important issue whether surplus labor is a necessary condition for growth.
This model has been employed quite successfully in Singapore. Ironically however it has not been employed in Sir Arthur Lewis' home country of St. Lucia.
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