In general, structural change theory represents a mech- anism by which underdeveloped economies transform their domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, industrially-diverse manufacturing and service economy. The two most well known representations of the structural change approach are the Lewis (1954) “two-sector surplus labor” model and the Chenery et al. (1986) “patterns of development” analysis.
In the mid-1950s, Nobel laureate W. Arthur Lewis (1954) first formulated his structural transformation model based primarily on subsistence economies, and the Lewis model has since been the dominant model for explain- ing growth in developing countries with surplus labor.