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 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.