Seite - (000026) - in Disrupted Development and the Future of Inequality in the Age of Automation

16 L. SCHLOGL AND A. SUMNER where demand rather than supply determines the rate of accumulation. From this basis Kaldor (and later Thirlwall) developed models where the growth of exports leads to specialization which then leads to increases in productivity and skills improvements. This then causes resources to move to the export sector.7 2.3 economic development with structurAl trAnsformAtion: lewis revisited Arthur Lewis (see notably, 1954, 1958, 1969, 1972, 1976, 1979) provided one of the best-known models of economic development in developing countries. Although sixty years old in its earliest iteration, the model remains relevant today to developing countries (see for contem- porary discussion, Gollin, 2014). The dual model provides a heuristic device or an ideal type, in the Weberian sense, for thinking about struc- tural transformation and economic development with an emphasis on labor, which is the factor of production that dominates most developing countries. Lewis argued that the driver of capital accumulation was a sectoral movement of labor, from the “traditional” or “subsistence” or “non- capitalist” sector (of low productivity, low wage, priced to average prod- uct not marginal product, and thus with widespread disguised unemploy- ment) to the “modern” or “capitalist” sector (of higher productivity, and where wages are set by productivity in the “subsistence sector”). Crucial is the existence of surplus labor in the traditional or noncapitalist sector. Because of this wages are set just above subsistence across the whole econ- omy, leading to the transfer of labor over time from traditional or noncap- italist to modern or capitalist sectors and the capture of labor productivity gains to capitalists as profits as these are the source of growth via reinvest- ment. The floor for wages is institutionally set at subsistence. When the surplus labor disappears an integrated labor market and economy emerge and wages will then start to rise. The Lewis model was intended as a critique of the neoclassical approach in that labor is available to the modern or capitalist sector of an economy not in a perfectly elastic supply but upward sloping rather than flat, and with a distinction between surplus-producing labor and sub- sistence labor (the latter of which was a negligible source of net profits for reinvestment, which Lewis saw as the driver for growth). Lewis also