Both the Lewis and HT models assume but do not explain the reasons for high and sticky
modern sector wages. These high wages could be due to minimum wages, unions, or efficiency
wage considerations. The labour turnover model (Stiglitz 1974) proposes that firms pay higher
wages to reduce quit rates. Alternatively, the biological efficiency wage model (Stiglitz 1976)
assumes that firms pay higher wages so that workers have enough nutrition to work productively
and avoid illness.
The HT model and Fields extension, show how surplus labour is manifested in open
unemployment and urban informal employment, in addition to subsistence agriculture. The central
underlying problem giving rise to dualism, however, remains the scarcity of relatively high-paying modern sector
jobs, as stressed by Lewis (1954).
Both the Lewis and HT models assume but do not explain the reasons for high and stickymodern sector wages. These high wages could be due to minimum wages, unions, or efficiencywage considerations. The labour turnover model (Stiglitz 1974) proposes that firms pay higherwages to reduce quit rates. Alternatively, the biological efficiency wage model (Stiglitz 1976)assumes that firms pay higher wages so that workers have enough nutrition to work productivelyand avoid illness.The HT model and Fields extension, show how surplus labour is manifested in openunemployment and urban informal employment, in addition to subsistence agriculture. The centralunderlying problem giving rise to dualism, however, remains the scarcity of relatively high-paying modern sectorjobs, as stressed by Lewis (1954).
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