Economics Economics




Developmenteconomics has been an important field of economic studies over theyears. Some of the most significant economic development models inthe modern world are the dual-sector model, otherwise known as Lewismodel and the Harris-Todaro model. Harris-Todaro model is based onthe postulations that rural urban migration is as a result of incomeinequality between the rural and urban sectors of the economy. Thisresults into increased unemployment in the urban centers resultinginto increased income inequality and poor living standards (emergenceof slums). On the other hand, Lewis model looks at economicdevelopment in terms of labor transiting from a capitalistic to asubsistent sector. The model postulates that workers are attracted tothe manufacturing sectors due to surplus labor in the agriculturalsector. The model also assumes that a more development capitalisticsector means a better economy, transition into advanced manufacturingeconomy results into economic growth. This results into increased percapital income, stable income, urbanization and reduced poverty. TheLewis model of economic development is more applicable in the SriLankan economy. In the colonial era, Sri Lanka was a plantationcountry specializing in the production of tea and rubber. However,transition from into an industrial economy with increased focus onfood processing, textiles and tourism in addition to agriculture hasmore that double the per capital income in the recent past. This hasled to increased urbanization, reduced poverty and unemployment ratesas well as improved quality of life. For example, between 2005 and2010, poverty and unemployment rates reduced by 15.2 to7.6 percentand 7.2 to 4.9 percent respectively. This is because the surplusemployment in the agricultural sector is absorbed in the growingprocessing, manufacturing and tourism sectors resulting into atransition into a capitalistic economy in Sri Lanka.


Ministryof Finance (2011). AnnualReport 2010.Ministry of Finance – Sri Lanka. Available

Nafziger,E. W. (2005). Economicdevelopment,New York: Cambridge University Press.