Abstract

It is widely known that in Brazil, agricultural! growth and modernization are
taking place together with a substantial “liberation” of the rural workforce. According to
evaluations based on the neoclassical doctrine, this is due to a severe distortion of relative
factor prices. Artificially cheap equipment and “expensive” labor have favored a large scale
substitution of the former for the latter. Thus, workers are being driven out of the farms at
a faster rate than that allowed by the creation of jobs in the rest of the economy. To correct
this situation, it would be necessary to eliminate the factor price distortions. The paper
argues that these evaluations are mistaken. They ignore the real nature of the process that
led to the adoption of mechanical technologies and to a growing “liberation” of manpower
from rural areas; the phenomenon is considerably more complex than what is implied in the
substitution of equipment for labor along an isoquant exhibiting substitutability. It argues,
furthermore, that the substitution of machinery for labor would not be reversed by the mere
adoption of a policy eliminating the “distortion” in factor prices.

JEL Classification: R23; Q12; J43.