Development with surplus population, the case of Taiwan : a critique of the classical two-sector model a la lewis

The main objective is to examine the relevancy of the classical model when it is applied to a developing economy with surplus population. Findings reported in the paper suggest that Taiwan"s development experience during the period from 1951 to 1965 contradicts the growth profile of the classical model of development with surplus labor on several counts, involving the labor transfer process, the movement of real wages, and changes in the terms of trade between sectors. Results from this empirical investigation also suggest that the condition governing labor supply may be less important as a factor in development than the state of technology and the rate of change in agriculture in a developing country with surplus labor. In overpopulated, developing nations, the ultimate outcome of development efforts may depend not so much on the race between growth in industrial employment and growth in population, as the classical development model may suggest, as the race between the rate of technical change in agriculture and the rate of population growth.