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Is Bangladesh’s Economy Approaching the Lewis Turning Point?

Author

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  • Subir Bairagi
  • Muntaseer Kamal

Abstract

During the last decade, Bangladesh economy grew consistently over 6 per cent annually; however, growth rate in the agriculture sector declined. Labour away from agriculture is evident; it is also evident real wages in the agriculture sector are rising. This could be an indication that Bangladesh is moving to a different stage of economic development. This article investigates whether Bangladesh is approaching a stage of economic development where marginal productivity of labour equals its price, called the Lewis turning point (LTP). We find that the reallocation of labour away from agriculture has had a positive but insignificant impact on economic growth in Bangladesh. We also find that the surplus agricultural labour has not fully been absorbed by the economy. Therefore, we conclude Bangladesh has yet to reach the LTP and suggest initiating policies (e.g., job creation in the service sector) that might speed up the country’s movement to the LTP. JEL: O11, O17, O41, O53

Suggested Citation

  • Subir Bairagi & Muntaseer Kamal, 2019. "Is Bangladesh’s Economy Approaching the Lewis Turning Point?," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 20(1), pages 19-45, March.
  • Handle: RePEc:sae:soueco:v:20:y:2019:i:1:p:19-45
    DOI: 10.1177/1391561418822208
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    References listed on IDEAS

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    More about this item

    Keywords

    Bangladesh; economic growth; labour productivity; Lewis turning point (LTP); production function; wages;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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