Technology Choice, Employment, and Development

The purpose of this article is to gain deeper insights into the development process led by international technology transfer and its implications for employment generation by reviewing case studies. It is argued that conventional rice research has fallen in the region of diminishing returns and, hence, greater research resources should be allocated to nonrice research and research based on new scientific principles. It is also argued that while the improved seed technology is conducive to employment generation, its impact is likely to be rather limited, which means that the development of the nonfarm sector is indispensable to achieve growth with equity. In the case of low-income economies, the paper finds that the choice of labor-using industrial technology is critical for successful development. To achieve appropriate technology choice, it will be imperative to create and maintain competitive market environments. ∗ Keijiro Otsuka is Professor of Economics, Tokyo Metropolitan University and Research Fellow, International Food Policy Research Institute. An earlier version of this paper was presented at the Asian Development Bank Development Round Table on Employment Creation for Broad-Based Growth, held at the ADB Headquarters in Manila on 12-14 October 1994. The author would like to thank Jere Behrman, Anil Deolalikar, Dipak Mazumder, M.G. Quibria and other participants in the Round Table, and three anonymous reviewers of this journal for useful comments. The author is also heavily indebted to Deqiang Liu and Naoki Murakami, who have jointly carried out a recent project on the People's Republic of China from which this paper partly draws. Asian Development Review, vol. 13, no. 2, pp. 105-137 @ 1995 Asian Development Bank 66 Technology Choice, Employment, and Development Kejiro Otsuka Recent studies in development economics highlight the importance of technology catch-up with developed countries in the development process of less developed countries (LDCs). This point has been long recognized since the seminal work of Gerschenkron (1962). It is also reported that Japan's success of economic development has depended heavily on technology borrowing from abroad, and its subsequent assimilation and adaptation to domestic conditions (see, for example, Ohkawa and Rosovsky 1968). Essentially the same process of technology transfer seems to have played a major role in the “miraculous” development of other East Asian countries (World Bank 1993). The central issue in development economics is to identify the key factors governing the success and failure of technology transfer to LDCs. In-depth micro-level case studies as well as careful macrolevel intercountry analyses are required to shed light on this question. While it is beyond the scope of this study to address such a broad issue, we must recognize that the success and failure of technology transfer has a significant implication not only for economic development but also for employment generation. As White (1978) cogently argues, labor-intensive and less knowledge-intensive technology is appropriate for LDCs where unskilled labor is abundant relative to capital and skilled labor. If this is indeed the case, appropriate technology transfer will make a significant contribution to both employment creation and development, which will help realize growth with equity. It is important to recognize, however, that the choice of appropriate technology is not simply a choice from a “shelf' of techniques: It involves a whole series of conscious efforts for adaptation because the technology is circumstance-specific, hence, adaptation is a necessary component of technology transfer from developed countries to LDCs (Evenson and Westphal 1995). International technology transfer is critically important not only in industries but also in agriculture. Since agricultural technology, such as improved seed varieties, is highly specific to physical environments, its transfer from one location to another with different climatic and other natural conditions requires adaptive research. A good example is development and diffusion of high-yielding, modern rice varieties (MYs) in tropical Asia which led to the Green Revolution in the 1970s and 1980s. Its thrust was to develop short and stiff plant types, which efficiently absorb nutrients to increase grain yields based essentially on scientific methods established in Japan. Improved methods of developing new varieties were transmitted initially from Northeast to Southeast Asia, and later from Southeast to South Asia (Hayami and Otsuka 1994). Such international technology transfer was facilitated by investments in complementary inputs, i.e., irrigation, drainage, and flood control needed for efficient exploitation of new varieties. While consensus exists as to the positive impact of the Green Revolution on agricultural production and development, its impact on labor demand has been debated: although the direct effect of MY adoption on labor demand was positive as it promoted intensified cultural practices, the adoption of MYs was often followed by the adoption of labor-saving technologies, such as tractors and direct seeding. Therefore, to the extent that the MY adoption induced the adoption of labor-saving technologies, the net effect of MY adoption on labor demand was likely small, or even negative. Given the large share of labor force engaged in agriculture in LDCs, the assessment of labor absorption capacity of technologically progressive agriculture is critically important. The purpose of this article is to gain deeper insights into the development process led by international technology transfer and its implications for employment generation by examining specific examples of technology transfer within the Asian context. However, the empirical study which attempts to trace the process of technology transfer in Asia is extremely scanty. Therefore, our knowledge on the dynamic process of technology transfer is far from adequate to derive definitive policy implications. The ultimate goal of this article is to stimulate further research in this area. The organization of this paper is as follows. The second section presents a conceptual framework, which integrates the role of technology transfer and its impact on labor demand and intersectoral labor migration. The third section reviews the experience of the Green Revolution and discusses the technology strategy beyond the era of the Green Revolution. The fourth section is devoted to the exploration into the 67 Technology Choice, Employment, and Development Kejiro Otsuka significance of technology choice in the development process based on case studies pertaining to Japan, India, and People’s Republic of China (PRC). The final section summarizes policy implications. Conceptual Framework Population growth in Asia is still very high, even though it has been declining over time. As Table 1 shows, the average annual rate of population growth during the 1980s generally exceeded 2 percent, particularly among low-income countries. Therefore, labor force will continue to grow in the foreseeable future in many countries. While the share of agriculture in GDP is relatively small except in very low-income countries, the importance of agriculture in terms of labor employment continues to be exceedingly high in most countries. The average income of the rural population is low, who also often suffer from severe poverty (Quibria 1993). Since the demand for agricultural products generally grows slower than national income, the demand for labor tends to grow less rapidly in the agricultural sector than in nonagricultural sectors. In order to absorb the growing labor force and to provide better employment opportunities for low-paying agricultural workers, it is critically important to increase the labor demand in nonagricultural sectors. It is unrealistic to assume, however, that nonagricultural sectors (industrial sectors as well as service sectors) alone can create adequate jobs for an increasing labor force and a number of low-income rural workers. It is equally important to increase labor employment opportunities in agriculture. Table 1: GDP Per Capita, Population Growth, and the Importance of Agriculture in Asian Countries GDP Annual Population Share of Agriculture Per Capita Growth Rate GDP Labor Force (1990) (1980-1990) (1990) (1990)