INDUCED TECHNICAL CHANGE IN CENTRALLY PLANNED ECONOMIES

It has generally been assumed that the inferences of the induced technical change model with respect to the direction of technical change could not be expected to hold for the centrally planned economies. In this paper we test three hypotheses generated from the induced technical change hypotheses against the experience of centrally planned economics: (a) if land becomes increasingly scarce new technology will be biased in a land-saving direction; (b) if labor becomes increasingly scarce new technology will be biased in a labor-saving direction; and (c) changes in the land-labor ratio have been induced by changes in relative factor endowments. The results suggest a bias toward mechanical and against biological technology regardless of factor endowments. This is consistent with the well known ideological or policy bias in a number of centrally planned economies toward a capital-intensive development strategy.