1. LEWIS THEORY OF UNMLIMITED SUPPLY OF LABOUR

2. LEWIS MODEL
The model seeks to explain that by judiciously exploiting their unlimited supply of labour,the less developed countries can stimulate their domestic capital formation & thereby the process of growth.
“ECONOMIC DEVELOPMENT WITH UNLIMITED SUPPLY OF LABOUR”

3. ASSUMPTIONS
Because of the high density of population in less developed countries, many people are disguisedly unemployed.
The supply of labour is perfectly elastic at the subsistence rate of wages.
Less developed economies are dual economies.

4. Features of lewis model
Mobilisation of labour
less developed countries should mobilise labour from the sLubsistence sector where the marginal productivity of labour is low & transfer it to the capitalistic sector where marginal productivity of labour is high.

5. Capitalistic sector
Lewis defined this sector as "that part of the economy which uses reproducible capital and pays capitalists thereof". The use of capital is controlled by the capitalists, who hire the services of labor. It includes manufacturing, plantations, mines etc. The capitalist sector may be private or public.
OS is as before average subsistence earnings, and OW the capitalist wage.
WN1Q1 represents .. the surplus in the initial' stage. .”, Since some of this is
reinvested, the amount of fixed capital increases.

6. Hence the schedule of the
marginal productivity of labour is now raised throughout, to the level of N2Q2.
Both the surplus and capitalist employment are now larger. Further
reinvestment raises the schedule of the marginal productivity of labour to
N3Q3. And the process continues so long as there is surplus supply of labour.

7. Capital formation through bank credit
Lewis is of the opinion that in less developed countries capital formation may be stimulated through bank credit as well.
Inflation generated by way of bank credit in the process of capital formation is self- liquidating.

8. End of growth process
The process of growth comes to an end owing to several factors:
Increased demand for workers
When the pressure of population increases in subsistence sector.

9. criticism Limited scope Mobility of labour is not easy
Lack of skilled workers
Lack of entrepreneurs
Unequal distribution of wealth
Neglect of aggregate demand

10. Thank You