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The Choice of Techniques

In: Growth and Development

Author

Listed:
  • A. P. Thirlwall

    (University of Kent at Canterbury)

Abstract

If labour is more abundant and capital is scarcer in developing countries than in developed countries, we might expect to observe the use of more labour-intensive techniques of production in the industrial sector of developing countries, reflecting a lower price of labour relative to capital. Figure 9.1 shows this. Assuming the same production function in the two sets of countries, labelled ‘1’, and holding everything else constant, the lower relative price of labour in the developing country, given by the price line (or isocost curve) cb, gives a more labour-intensive choice of technique than in the developed country, where the relative price of labour is given by the steeper line ad.

Suggested Citation

  • A. P. Thirlwall, 1989. "The Choice of Techniques," Palgrave Macmillan Books, in: Growth and Development, edition 0, chapter 0, pages 220-236, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-19837-5_9
    DOI: 10.1007/978-1-349-19837-5_9
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