The terminology differs somewhat but most of the discussion in literature centring around questions such as labour-versus capital-intensive techniques, industrialisation versus agricultural development, free trade versus protectionism for infant industry, import substitution versus export-oriented industrialisation, heavy industry versus light industry, and more recently modern versus appropriate technologies, all have ramifications, implicitly or explicitly, for defining an optimum factor mix. Conceptually the argument appears to be straightforward and simple. The factor endowments and hence relative-scarcity factor-price structures in developing countries are substantially different from those found in the highly industrialised developed countries. As a result, they should emphasise those activities which use more of the abundant factor (labour) and less of the scarce factor (capital). Thus, light industries, agriculture, export-oriented development strategies should be preferred. In fact, there ought to be two types of technologies for the two types of countries (developed and developing) using different mixes of factors of production for the manufacturing of the same product. This is dictated not only by efficiency but also by equity and income distribution considerations. For, by using higher doses of labour per unit of output not only the output is maximised, but also the level of unemployment is decreased and a more equitable distribution of income is attained. If this could be done, the solution would be ‘optimum’ in that both efficiency (output maximisation) and equity (employment maximisation) would be simultaneously achieved.
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