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What are the predictions of Lewis?
For Lewis, Harrod Domar is right to emphasise the task of savings and investment although structural change and a new industrial sector are needed also.
• Lewis predicts that wages require being 30% higher within cities to attract labour through the land.
• Additional workers into urban areas increase output therefore incomes and profits. Additional incomes increase demand for domestic products. Raised profits fund increased investment. Therefore rural urban migration offers self-generating growth.
• Ultimately as surplus labour into rural areas that MP=0 have moved off the land and rural wages start on to rise. The equalisation of industrial and rural wages eliminates the incentive to migrate to cities. The essential structural change is complete.
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