Growth and Development Theories - II. Structural Change Model

Structural Change Model

Focuses on the transformation of domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, more urbanized, and more industrially diverse manufacturing and service economy.

W. Arthur Lewis’ Theory of Development

It explains development as the transfer of surplus labor from a low-productivity agricultural sector to a high-productivity industrial sector, leading to economic growth.

Traditional (Agricultural) Sector

Characterized by excess labor, low wages, and low productivity where workers can be moved without reducing output.

Modern (Industrial) Sector

A growing sector with higher wages and productivity that absorbs labor from agriculture and reinvests profits to expand.

Hollis B. Chenery Patterns of Development

Economic development follows common patterns where countries shift from agriculture to industry and services, alongside changes in income, urbanization, and trade.

FEATURES OF THE DEVELOPMENT PROCESS
1. Structural Transformation

Shift from agriculture to industrial production

FEATURES OF THE DEVELOPMENT PROCESS
2. Capital Accumulation

Steady accumulation of physical and human capital

FEATURES OF THE DEVELOPMENT PROCESS
3. Changing Consumption Patterns

Change in consumer demands from emphasis on food and necessities to desires for diverse manufactured goods and services

FEATURES OF THE DEVELOPMENT PROCESS
4. Urbanization and industrial Growth

Growth of cities and urban industries as people migrated from farms and small towns

FEATURES OF THE DEVELOPMENT PROCESS

5. Demographic Change

Decline in family size and overall population growth as children lose their economic value and parents