Can Labour-Savings, Capital-Intensive Production Techniques Reduce Unemployment Rates in Developing Countries? Evidence From Malaysia

Traditional economic wisdom predicts that unemployment rates will rise in most of the developing countries as a result of following an industrialisation process that utilised a labour-saving production technique. The findings of this paper suggest otherwise. Based on the development experience of Malaysia, unemployment rates were found to decline significantly when Malaysia switched from a labour intensive production technique to one that is capital intensive. The Malaysian experience suggests that initiatives put in place to encourage capital investment may lead to employment growth, thereby reducing unemployment