Labour Intensive Industry versus Capital Intensive Industry
There is a problem of choosing between labour intensive industries or Labour intensive methods and Capital Intensive industries or Capital Intensive Methods. In under developed countries, due to chronic unemployment or cheap labour to capital is preferred.
The most efficient use of resources in less developed countries will tend to favour labour intensive methods. For innovations, it would also follow the Capital Saving and Labour – using innovations, it would be preferred. It would be profitable to adopt capital-intensive techniques to increase productivity.
If the export industries are capital-intensive such as mining and mineral refining, then, even though there is surplus labour, extensive investment has to be done in order to earn necessary Foreign Exchange.
For example, In India, Labour force is available in plenty. This is the reason most of the building industry is Labour Intensive including both skilled and unskilled labour.