First published in The Manchester School in May 1954, the article and the subsequent model were instrumental in laying the foundation for the field of Developmental economics.
(The term surplus labour here is not being used in a Marxist context and only refers to the unproductive workers in the agricultural sector.)
Over time as this transition continues to take place and investment results in increases in the capital stock, the marginal productivity of workers in the manufacturing will be driven up by capital formation and driven down by additional workers entering the manufacturing sector.
The theory is complicated by the fact that surplus labour is both generated by the introduction of new productivity enhancing technologies in the agricultural sector and the intensification of work.
The model assumes rationality, perfect information and unlimited capital formation in industry.
However, the model does provide a good general theory on labour transitioning in developing economies.
This model has been employed quite successfully in Singapore and helps explain the rapid growth in countries like the UK during the industrial revolution.