Employment, output and the choice of techniques. The trade-off revisited

In this paper we explore the choice of techniques issue in a dual economy model with unemployment in the urban sector. Conventional wisdom suggests that developing societies attempting to modernize and transform backward sectors into advanced ones do so by choosing labor-intensive technologies to avoid rising unemployment. We analyze the effect of labor-intensive technology on (a) the level of urban unemployment, and (b) the relationship between the levels of urban employment and unemployment. We show under quite reasonable conditions that choosing a labor-intensive technology will actually aggravate the unemployment problem. We also show that the nature and pattern of the trade-off between modernization and employment are crucially dependent on the existing agricultural technology.