Question

Lewis's dual economy model argues that wages remain stagnant in the modern sector until surplus labour in the traditional sector is fully absorbed in the modern sector, a condition often unmet in India due to

• A. Falling farm productivity
• B. Disguised unemployment
• C. Labour scarcity
• D. Decline in unorganised sector

Hint:

Lewis's Dual Economy Model is based on:
• Surplus labour in agriculture.
• Constant industrial wages.
• Transfer of labour from agriculture to industry.
• Economic growth through industrial expansion. The model assumes the existence of disguised unemployment in the traditional agricultural sector.

Answer 1

The Correct Option is B

Concept: The Lewis Dual Economy Model, proposed by W. Arthur Lewis, explains the transfer of surplus labour from the traditional agricultural sector to the modern industrial sector. According to the model, wages in the modern sector remain constant until all surplus labour from the traditional sector is absorbed.

Step 1: Understand the role of surplus labour. In developing countries like India, agriculture often has \[ \boxed{\text{Disguised Unemployment}} \] where more workers are employed than actually required for production. This surplus labour keeps wages low and delays complete labour absorption into the modern sector.

Step 2: Examine the given options.
• [(A)] Falling farm productivity is not the basic assumption of Lewis's model.
• [(B)] Disguised unemployment creates surplus labour, which is central to the Lewis model.
• [(C)] Labour scarcity is the opposite of Lewis's assumption.
• [(D)] Decline in the unorganised sector is unrelated to the model. Therefore, \[ \boxed{\text{Disguised unemployment is the correct answer.}} \] Hence, \[ \boxed{(B)\;\text{Disguised unemployment}} \]