Lewis Model and Pakistan DEVELOPMENT ECONOMICS
Lewis Model and Pakistan DEVELOPMENT ECONOMICS
Lewis Model and Pakistan DEVELOPMENT ECONOMICS
Research Research
Abstract
Introduction
Diagram No. 1
Agricultural Output, Agricultural Labour and Lewis Ranis Fei
model stages of Economic growth
This paper attempts to find out the answers of the following questions:
Theoretical Underpinning
Empirical Studies:
Field (2004) evaluated Lewis model after fifty years and found
out that many of the core assumptions are still intact however minute
changes are being required. Young (2010) studied Lewis transition of
China and India. The article concluded that labour migration helped
both the economies to grow with such a high pace. However, different
arrangements are made to channelize the labour migration explains
partially the different trajectory of economic path.
Methodology
Converting functional form into log linear form we get equation 3 & 4.
Analysis
The sectoral labour force share is a key to analysis.
Agriculture sector of Pakistan almost absorbs 50% of the labour force.
This leads to a huge number of abundant labour force in this sector.
Similarly the Lewis Ranis-Fei model explains the phenomena of
abundance of labour force in agriculture sector and its implications
on economic development.
Table: 1
Production function of agriculture sector
AR(1) -0.03216
(0.172177)
Prob (F-Statistics) 0 0
Observation 30 30
*Authors Estimation
*, **, *** represents statistical significance at 1% , 5%, 10% respectively.
Table: 2
Production function of Non agriculture sector
AR(1) 1.014052*
(0.032676)
Observation 30 30
*Authors Estimation
Graph 1
800000
600000
200000
-200 000
2. This shows that Pakistan is still in the first stage of Lewis Ranis-Fei
model where marginal productivity is lower than the institutional
wage (average productivity). The insignificant improvement in
Marginal productivity suggests that Pakistan is still on its first phase
of economic development
0.6
0.5
0.4
0.2
0.1
0.0
3
8 5
8 7
8 9
8 1
9 3
9 5
9 7
9 9
9 1
0 3
0 5
0 7
0 9
0 1
1 3
1
FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY FY
Labour reallocation
Authors estimation
Table: 3
Sectoral Growth Decomposition
Parameter Average Product of Contribution to
Estimates Growth parameter and sectoral growth
(1) (2) growth (4)
(3)
Agriculture Sector
Total 21.62
Total 20.1
Notes: Column (1) is the parameter estimates of GLS equation taken from
table 1 and 2
Column (2) is the average growth rates of the variables.
Column (3) is the product of column 1 and 2.
Column (4) parameter products are divided by total of respective sectors to
findout the percentage contribution in growth.
Conclusion
which is very low and has very huge room of improvement. The
countries focusing on labour reallocation has a very quick transition
speed under Lewis Ranis-Fei model (Ercolani & Wei, 2010). The study
also identifies that Pakistan is at the first stage of economics
development of Lewis Ranis-Fei model and MPL is lower than
institutional wage (APL).
Reference
Cai, F. (2007)TheLewisian turning point of China’s economic
development. In Cai, F.and Du, Y. (eds.) The Coming Lewisian
Turning Point and Its Policy Implications, Reports on China’s
Population and Labour. Beijing: Social Sciences Academic
Press.