Sentence Insertion - Productive Dualism

There is a sentence that is missing in the paragraph below. Look at the paragraph and decide where (option 1, 2, 3, or 4) the following sentence would best fit.

Sentence: Dualism was long held as the defining feature of developing countries in contrast to developed countries, where frontier technologies and high productivity were assumed to prevail.

Paragraph: (1). At the core of development economics lies the idea of 'productive dualism': that poor countries' economies are split between a narrow 'modern' sector that uses advanced technologies and a larger 'traditional' sector characterized by very low productivity.(2). While this distinction between developing and advanced economies may have made some sense in the 1950s and 1960s, it no longer appears to be very relevant. A combination of forces have produced a widening gap between the winners and those left behind.(3). Convergence between poor and rich parts of the economy was arrested and regional disparities widened.(4). As a result, policymakers in advanced economies are now grappling with the same questions that have long preoccupied developing economies: mainly how to close the gap with the more advanced parts of the economy.