Distributed Infrastructure Investments Could Boost Demand for “Agricultural” Labor

Published on Author Christian von Hassell

We have talked in class about agricultural labor markets in developing countries. In many places in China, technological advances have really stifled the marginal product of additional agricultural laborers for a given area. While the economy benefits from these workers changing sectors, that shift carries fairly significant transaction costs.

While such a transition is inevitable in the long-run, perhaps some rural infrastructure investments could take advantage of excess labor in the short run. Investments in a distributed solar grid could take advantage of over-supplied agriculture labor markets and strengthen the energy infrastructure of rural China.

Li’s book never really explicitly discussed the impact of large numbers of “agricultural laborers” actually working on infrastructure projects like dikes. However, the use of such labor for other activities besides simply farming could help boost overall productivity in the short-run.



3 Responses to Distributed Infrastructure Investments Could Boost Demand for “Agricultural” Labor

  1. I like the point you’re making here, Christian. The surplus of laborers is definitely an under-utilized asset to China’s agricultural sector. China could take advantage of the growing concern of sustainable farming practices by creating a more “green” infrastructure in rural areas. I am, however, relatively uneducated on the impacts of solar and other renewable energy sources on the labor market. You are absolutely right in your prediction of its short-term boost in productivity. However, I wonder how many workers it takes to manage and maintain these systems.

  2. Good question Patrick. I think that in many ways it could resemble similar requirements to dike systems, with large upfront manpower requirements to actually construct the projects. Upon completion, I suppose the need for operating labor will be far lower in comparison.

  3. Yes, that was the concept behind the Great Leap Forward, that there were more farmer laborers than needed so workers could be diverted to other tasks. Now the GLF went way too far, leaving insufficient workers to harvest crops. But the principle does remain the same, and rural infrastructure investment thus has low opportunity cost for the economy. Once however the first round of that’s done, what next? Do you really need all rural roads to be paved? Houses to be rebuilt yet again?

    In other words, there’re diminishing returns to (infrastructure) investment, such that even with cheap labor further construction doesn’t make (economic) sense. Of course depending on who funds it, it may make political sense.