lewis two sector

The Lewis Two-Sector Model. Lewis began with the assumption that the economies in Latin America consisted of two sectors: (1) a traditional rural subsistence sector, characterized by zero or very low productivity surplus labor and (2) a high productivity modern urban industrial sector into which labor from the subsistence sector is gradually transferred.
The primary focus of the model is both on the process of labor transfer and on the growth of employment in the modern sector. Both labor transfer and urban employment growth are brought about by output expansion in the mode n sector. The speed with which they occur is given by the rate of industrial capital accumulation in the modern sector. Such investment is made possible by the excess of modern-sector profits, on the assumption that capitalists reinvest all of their profits in capital expansion. Finally, the level of wages in the urban industrial sector is assumed to be constant and determined as a fixed premium over a constant subsistence level of wages in the traditional agricultural sector.
Lewis assumed the urban wage would have to be at least 30 percent higher than the average rural income in order to induce people to migrate from their home areas into the city. The model thus assumed that rural-to-urban migration was an essential part of the development process, and was, therefore, a good thing.
People expected that ISI would lead to the overall development of a country through a series of linked processes: the growth of urban industry; the migration of people out of unproductive jobs in rural areas; the expansion of employment in the productive modern sector; and an increase in the total wages earned by workers. Once this process is set in motion, then, presumably,...

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... airplane struggling to get off the ground (initial ISI). Then, when capital is reinvested and more workers are employed in the Modern Sector, and those workers begin to purchase more goods with their higher incomes, the Modern Sector would expand further. And so on as the economy “took off.”
The expansion of the Modern Sector in urban Latin America meant that millions of people living in rural areas picked up and left the countryside, in search of better paying jobs in the city. The Modern Sector was unable to absorb all of the newcomers. The result was the growth of poor neighborhoods, mostly located on the outskirts of the city. People living poor urban neighborhoods made a living doing odd jobs such as washing cars, working part time, becoming servants in middle-class households, selling items on the streets, such as newspapers, cigarettes, chewing gum.