DefinePK

Abstract

In many less developed nations, agricultural production is becoming more and more capital intensive. Some attribute this increased capital intensity to distortions in factor input prices. In this short paper an alternative explanation is developed and empirically tested. It is hypothesized that in less developed nations, where food consumption is low, as food prices rise relative to other items generally purchased by individuals in agriculture, families will find their ability to work impaired, the supply of labor will decrease, and, ceteris paribus, the real wage will tend to rise. Thus, some mechanization of farming activities may be due to the increased costliness of labor.