Factor Intensities in Manufacturing Industries in Pakistan

In: The Pakistan development review: PDR, Band 10, Heft 2, S. 147-173

Abstract

The choice of technology in the developing countries has been
a subject matter of considerable theoretical and empirical
investigation. That labour-abundant economy like Pakistan should opt for
labour-intensive technology in order to maximise income and employment
has been widely recommended. There has, however, been long-standing
controversy as to whether, and how far, the choice of labour-intensive
technology slows down the rate of growth of income as against the
maximisation of current income by increasing the share of wages in
income which are assumed to be wholly or mostly consumed and by
correspondingly reducing the share of profits which are assumed to add
mainly to the invisible surplus and thus to increase the rate of capital
accumulation. This line of reasoning postulates that a developing
economy has more or less free choice between alternative techniques,
embodying different degrees of labour intensity and has, in addition,
adequate instruments of policy at its disposal to regulate the choice of
technology in the public and private sectors of the economy; it further
seems to imply that it has very inadequate or ineffective instruments of
policy at its disposal to alter the disposition of income between
savings and investment, once the technology and its attendant
distribution of income between wages and profits are given. The
feasibility or the effectiveness of the various fiscal instruments for
increasing the rate of saving in a developing economy has often been
discussed, however, there is very little empirical analysis of the
existing pattern of technology as well as of the limitations on the
choice of technology in a country like Pakistan which imports technology
mainly under foreign aid tied to the purchases in the individual
aid-giving countries which happen to grant loan for individual,
particular capital projects.