Choice of Technique and the Volume of Saving

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-Douglas production function in its traditional form can be assumed to give a good approximation to reality. The relationship in question 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 conflict 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.