Institutional factors,government policies and appropriate technologies

Traditionally the use of inappropriate technologies in the developing countries has been explained by the existence of factor price distortions, e.g. the price of labor being artificially raised by labor legislation, and the price of capital being reduced by subsidies and unrealistic exchange rates. In reality the technological choice is often determined by economic conditions and the local sociocultural/political conditions. The institutional framework of the country may discourage the appropriate technology. The obstacles can be overcome when the following conditions are met: 1) a national consensus about the need for development efforts and importance of policy goals; 2) promising market prospects and/or an effective marketing system; and, 3) sufficient industrial competition in both home and international markets. Institutional problems come from the generation and diffusion of technologies from the supply side which are introduced to people who do not see the need for them. More emphasis on the marketing side ususally results in application of correct technology, especially where governments fund research and development projects and formulate their plans on the basis of a concrete investment or production plan and a clear idea about the target market. Land reforms and agricultural price policies are needed as well as the establishment of an efficient national administrative network.