Retesting the Dual Sector Model in India and Brazil

Abstract

India and Brazil are developing countries and emerging markets, enjoying economic development in the recent decades. The development experience of both countries may provide persuasive evidences in supporting or disapproving the economic theories. Arthur Lewis’ structural-change theory focuses on the transition of economic structure with the character from depending heavily on agricultural sector to the character with more contribution from industrial sector occurring in the developing countries. His model of dual sector, as an important part of the structural-change theory, argues that the labor moving from agricultural sector to industrial sector associated with the migration from rural area to urban area contributes to the economic development as well as the alleviation of overpopulation in agricultural sector and the stagnation of marginal product resulted from the population growth and technology advancement in the developing countries. This paper explores the adaptability of the assumptions and the arguments of the Arthur Lewis’ Model in India and Brazil in the structural change between the agricultural and industry sectors. There is quite some evidence supports the argument of dual sector model, though the model is not fully explanatory on the economic development of the two developing countries.