The Process oj an Innovation Cycle 135 



diversified, operators managing three to four lines of production 

 (field crops, livestock, orchards, etc.). ''Established" moshavim 

 were founded in the 1920s and 1930s, before the creation of the 

 State of Israel (1948), the "young" moshavim after 1948. Most of 

 the members of the young moshavim immigrated to Israel in the 

 1950s and had no prior agricultural experience. 



Both kibbutzim and moshavim try to adhere to the principle of 

 self-labor to avoid exploiting the work of others. Though this 

 principle is not followed equally by all, it imposes a certain restric- 

 tion upon these settlements. Private Otw^xsh) agriculture, on the 

 other hand, is based to a large extent on hired labor, including 

 seasonal employment. This is one of the reasons for it having a 

 lower capital-labor ratio than that of the moshav. 



The Arab is the only traditional farm sector in Israel. Levels of 

 schooling and capital-labor ratio are the lowest in the indus- 

 try.'^ This sector has in the past concentrated on dry farming 

 and irrigation. The latter (necessary for intensive vegetable pro- 

 duction) is still not as widespread as on most Jewish farms. 



Though markets, particularly for land and capital, are not per- 

 fect, the data in table 7.1 are consistent with the basic assump- 

 tions of our model. Capital-labor ratios are positively correlated 

 with schooling. Distribution of farm activities differs from sector 

 to sector in agreement with sectoral comparative advantages. This 

 strengthens the conjecture of a rising labor-opportunity-cost with 

 schooling." Innovativeness is also in strong agreement with the 

 model's assumption. The kibbutzim are by far the most innova- 

 tive (Molho, Katz 1970). Young moshavim, being less experi- 

 enced and schooled, are less innovative than the established ones. 

 The private sector has a more diversified record in this respect. 



10. Extended families contribute low opportunity-cost labor in this sector. 



11. in a competitive economy, farm types and capital labor ratios are to a large 

 extent endogenous. Because of complementarity between schooling (our most im- 

 portant measure of skill) and other factors, more schooled farmers will be more 

 capital-intensive; and since there is often a dominant technology in the produc- 

 tion of a certain product (one exception being dairy in table 7.1), capital labor ratio 

 is altered by changing the combination of activities— modifying the farm type. 

 The higher implicit labor cost (shadow price) of the better-educated farmer is aug- 

 mented by his ability to manage a more capital-intensive enterprise. 



