Globalization. In the original Lewis (1954) model, the speed of economic development depends
on domestic capital investment and technological change in the modern sector.8 Fei and Ranis
(1964) and others extended the Lewis model by refining the intersectoral linkages and the role of
agriculture, while still assuming a closed economy. Contemporary globalization requires some
important amendments to the Lewis and Fei-Ranis framework, through two channels: a) Foreign
capital, particularly foreign direct investment (FDI), provides an alternative to domestic savings
and technological change. Moreover, FDI provides higher-paying jobs, increased competition,
more training, and knowledge spillovers (Javorcik 2012). b) Outsourcing of labour-intensive
manufactured products such as apparel by global supply chains (e.g., Gereffi 1999) also raises the
demand for labour in developing countries. Murphy et al. (1989) is in the spirit of Lewis (1954),
allowing for exports but with costly access to foreign markets. Thus, the central problem
becomes alleviating bottlenecks to labour-intensive exports. Golub et al. (2007) point to the
importance of domestic ‘service links’, i.e. infrastructure and public services, in enabling
developing countries to participate in the international fragmentation of production. Viewed
from this perspective, accelerating growth of the modern sector requires improvement of the
business climate in order to attract FDI and other ‘footloose’ inputs that are critical to global
competitiveness in manufacturing.