Here we assume that GR is technological and biological. Whether
GR is labor
using or labor displacing depends on the net effect of the forces released by
two different kinds of technical progress. We will analyze the impact on cost of
production. We will see whether the cost rise due to biological innovations are
greater than or less than the cost reduction due to mechanical innovations.
Before the innovation the cost are TC1, and after they are
TC2. It is clear that they
are lower with the new techniques than the old techniques.
Assume that farmers want to maximize profit. Then the equilibrium will be attained
where profits are maximum. TC, TR and total output are given by Q1A,
Q1B and OQ1,
before the introduction of new technology. With the new technology or techniques TR rise
while TC fall and at equilibrium net profit is CD which is much greater than AB,
It is clear that the new technology raises the net income or profit of the
farmers It is shown in Fig.
Effects of Green
Revolution on Relative Factor Share:
As the farmers release the opportunity of raising their income through
adoption of new technology, the absolute income of all factors should rise as
more inputs are used for increasing production. However the relative changes in
factors shares depend upon number of factors like:
(i) Neutrality or Non-neutrality technical progress.
(ii) Changes in the sum of production elasticities under technical progress.
(iii) Changes in capital labor ratio after the introduction of innovations in
In order to understand the process of changes in factors shares we use the
following Cobb-Douglas Production Function (CDPF).
Q = ALa (B1)b (B2)c (C1)d
Where Q = Crop production, L = Land, B1 = Human Labor, B2= Bullock Labor, C1 =
Machinery and Equipment,
C2 = Non-mechanical Inputs e.g., better seeds, fertilizers etc.
and a, b, c,
d, e = Relevant partial elasticities.
In CDPF the ratio of partial elasticities shows the relative factor shares
between inputs. We know that in CDPF elasticity of substitution is one. Thus it
is independent of returns to scale. Changes in factor shares are observed only
when an extra new input either as substitute or as complement to current inputs
is used. We assume that increasing use of
C2 imply a technical
progress. Hence the new production function is as:
Q1 = A1La1
(B1)b1 (B2)c1 (C1)d1
It has been observed that
C1 is capital using or labor displacing. While
is capital saving and labor using. Due to technical progress there is a
contradictory impact on labor. Therefore, we will have to estimate the values of
b, b1 , d, d1, e and e1.
We should expect a fall in labor shares with reference to
C1 (a labor - displacing input), when
b1/d1 > b/d. Also, when
is a complementary input (e.g., new seeds,
fertilizers), the share of labor in NI will increase. In such case
b1/e1 > b/e.
More formally, if the final impact of
green revolution is to lower the share of labor in total income, the net effect
should be as follows:
In the large number of areas average income and real wages have gone up due
to green revolution for most classes of farmers. Large fanners have benefited
relatively more than medium and small farmers. To measure the income
distribution impact of the relative rise in output on low or high income (Y)
farms, we need to know about the price elasticity of demand. Such elasticity can
be either greater or less than unity. Hence we may have:
It is clear that whether demand is price elastic and increase in crop
production will increase total revenues depend upon the degree of elasticity of
demand. The rise in supply more than demand will lower the price per unit of a
crop. If the small farmer fails to raise the production, his total revenue will
decrease. Again if he fails to change the use of traditional inputs, his cost
will remain the same and he will experience a fall in net income. However even a
low crop price may increase total income of the large farmers. Though his total
cost will rise due to rise in use of inputs, the profit maximizing farmers will
purchase inputs up to the point where MC = MR. His profits will increase. Hence
income differential between the large and small farmers will widen.
If the demand curve is price inelastic a rise in supply reduces both farm
price and total farm income. If the small fanners fail to contribute to increase
in supply or lower the level of input utilization, their aggregate income and
profit fall. However, the large farmers do not necessarily experience a fall in
total income in this case. This will also widen the gap between different
classes of farmers.
Now we conclude that technical progress due to green revolution may enlarge
the income differentials between the adopters and non-adopters. But ultimately,
the traditional farmers will also get the gains through adoption of new
technology. Then both the small farmers and the big farmers should invest -in chemical fertilizers. In this
way, the productivity of the land will rise and every type of farmer will reap
the gains from GR.