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Dual economy model developed by William Arthur Lewis explains the two sectors economy confronted by the developing countries; one refers to the traditional sector of the economy followed by low wages and infinite supply of labour whereas the other refers to the modern sector…
(2006a) On the other hand it relates to the determination of the terms of trade between developing and industrialised countries, with the former exporting raw materials and tropical products and the latter industrial products as "Arthur Lewis described the goal of economic development as the narrowing of the gap in per capita income between the rich and poor countries". (Hosseini, 2003, p. 91)
Two groups of countries i.e., north and south, rich and poor respectively, each produces two kinds of products, categorized as 'food' and 'coffee'. Food is common to both, while the other two referred to in the model as 'coffee' and 'steel' are exchanged. Lewis economic model explains as to how, subjected to certain specified conditions, the terms of trade will be determined by the relationship between labour productivity in agriculture of developing countries and industrialized countries. According to this analytical model, it is the low productivity of agriculture in the developing countries compared with agricultural productivity in the rich countries which decides the actual terms of trade between the two groups of nations". (2006a)
Professor Lewis' second main model despite disparate development perspectives, raised a number of unresolved interpretive problems that remain central to both political economy and the development debate upti ...
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