This research aims to explain how Georgia’s economic development in the past 12-15 years took place despite the absence of rural-urban migration, defying the predictions of the Lewis Model - one of the most influential theories in development economics.

The Lewis Model that has been a major influence on development theory for more than half a century predicts that rural-urban migration and economic development are intertwined. Indeed, it is hard to find cases in which economic development has occurred without rural-urban migration. In Georgia economic development has taken place despite the absence of rural-urban migration. Indeed, the share of the rural population has remained stubbornly fixed despite the fact that economic growth has been impressive. The main purpose of the research is to explain how economic development in Georgia has defied the predictions of the Lewis Model. This research intends to integrate the Lewis Model with Spatial General Equilibrium theory and to use time-series data for Georgia to test the Lewis Model in this broader theoretical context.