Industrial employment, investment equipment, and economic growth

The results from this article indicate that a particular type of industrialization, namely, one that involves employment rather than output or capital, plays a key role in the development process of low- to moderate-income countries. Consequently, the emphasis placed by De Long and Summers on the role of equipment investment in poor countries seems unjustified. On the contrary, nonequipment investment seems to be a more significant contributor to growth, perhaps because it has more favorable effects on industrial employment (it is more labor intensive than equipment investment). Better technologies may not represent a panacea but need to be evaluated on the basis of their implications for capital-labor substitutabilities and complementarities. Unlike De Long and Summers, we also think that the empirical evidence supports Moses Abramovitz's and David Landes's views on "human infrastructure" as a critical factor in the development process. The industrial employment variables used in this study measure the existence and the creation of such preconditions that allow a country to enjoy the fruits of the industrial revolution.