Application to Under-developed Countries
The theory of production is not a dry and abstract theory having little relevance to practical problems. It has a soccial significance for the under-developed countries which are faced, like others, with factor proportions problem. These countries have excessive rural population clinging to agriculture where their marginal productivity is practically nil. That is. if a sizable proportion of them is withdrawn. it would not significantly affect output. Such countries are characterised by ‘structural disequilibrium at the factorGlevel’ as Kindlebarger puts it. There is obviously a need for the adoption of more labour – intensive methods than capital-intensive methods. The factor combinations should embody high labour- . capital ratios. As economic development proceeds, the composition of demanded goods will change calling forth for a change in factor proportions in the processes of production.