OPC/U3 Topic 3 Capital Intensive
Prof. Harvey Leibenstein, Paul Baran, Rostow, Hirschamn Maurice Dobb and Mahalanobis are the chief advocators of capital intensive technique. They consider that this technique is indispensable for accelerating the process of growth. Prof. Paul Baran has the strong opinion about the necessity of using the capital intensive in less developed countries.
He observed that such countries should make use of their ability to draw upon the scientific and technological advancement of the more developed countries if they want to industrialize at a faster rate. Capital intensive technique refers to that technique in which larger amount of capital is comparatively used. In such a technique the amount of capital used per unit of output is larger than what it is in case of labour intensive technique.
To quote Prof. Myint, “the capital intensive or labour intensive methods of producing a particular commodity are classified by the modern factory methods of producing consumer goods and mechanized methods of constructing roads, irrigation works and other projects. Here, because of lower labour costs and higher productivity, the net output per unit of capital may be comparatively higher.” Capital intensive technique has been shown in diagram 2.
In this diagram isoquant Q represents the initial .level of output, using OL amount of labour and OC amount of capital. With the introduction of new technique a higher level of output is shown by labour (OL) but with greater dose of capital (OC1). Therefore, capital intensive technique is using more capital with the same amount of labour.