The purpose of this paper is to re-examine the relationship
between the degree of aggregate labour-intensity and the aggregate
volume of saving in an economy where a Cobb-6ouglas production function
in its traditional form can be assumed to give a good approximation to
reality. The relationship in ques¬tion has an obviously important
bearing on economic development policy in the area of choice of labour
intensity. To the extent that and in the range where an increase in
labour intensity would adversely affect the volume of savings, a
con¬flict arises between two important social objectives, i.e., higher
rate of capital formation on the one hand and greater employment and
distributive equity on the other. If relative resource endowments in the
economy are such that such a "competitive" range of labour-intensity
falls within the nation's attainable range of choice, development
planners will have to arrive at a compromise between these two social
goals.
