Choice Of Technique In The Indonesian Weaving Industry (vol.1)

Hill,Hal Cristopher,

1979 | Disertasi | S3 Economics

There is much discussion of the role of the manufacturing sector in LDCs in providing productive employment opportunities for a rapidly growing labour force. In recent years there has been widespread dismay at the relatively poor record of labour absorption in many LDCs. One reason for this poor record, it is argued, is the adoption of 'inappropriate' industrial technology. According to this view, capital-intensive machinery produced in western countries may not be suited to low-wage, capital-scarce LDCs. Far less attention has been given to detailed industry case studies, which examine the technological options for LDCs in a given industry, the economic performance of available techniques, and the impact of alternative sets of factor prices and policy regimes on the selection of industrial technology. The purpose of this thesis is to examine these issues with reference to the Indonesian weaving industry. During the last decade the industry has undergone a rapid transformation; the hand 100m sector has declined and a modern capital-intensive mill sector has emerged. For several reasons the Indonesian weaving industry is well suited to a choice of technique study. We argue that a proper analysis of the choice of technology in the industry requires a thorough understanding of the weaving industry in general, recent developments and the current structure of the Indonesian weaving industry in particular, the state of factor markets in the industry, and the nature of government policies. Our main findings are that, owing primarily to the existence of factor market segmentation, a wide range of weaving techniques is likely to remain for many years. We also conclude that it is economically rational for investors in the modern mill sector to adopt the most capital-intensive technology, given the factor prices they face. However, at an alternative set of policies - where resources are priced at a level approximating their social opportunity cost and certain government policy reforms are effected - a less capital intensive loom emerges as the preferred technique.There is no reason to presume that this technique would not be adapted more extensively if the necessary were introduced.

Kata Kunci : Indonesian Weaving Industry,Labour force,