Capitalintensive

Capital-intensive refers to production processes or industries that require large investments in physical capital relative to labor input. The degree of capital intensity is typically measured by the capital-labor ratio, such as the capital stock per worker or capital expenditures per unit of output. In highly capital-intensive settings, fixed costs dominate variable costs, and productivity gains often come from scaling up operations or adopting advanced technologies.

Industries that are commonly capital-intensive include utilities (electric power generation), oil refining and petrochemicals, mining, steel and other heavy manufacturing, telecommunications infrastructure, railways, and large-scale agricultural processing. By contrast, labor-intensive sectors rely more on human labor, such as some forms of agriculture or certain services.

The capital-intensive nature of an industry has several implications. It can yield higher productivity and economies of scale, creating barriers to entry due to substantial upfront investment and financing needs. However, high fixed costs also raise financial risk and depreciation sensitivity, making firms more vulnerable to downturns or demand shocks. Employment effects are mixed: automation and capital deepening can raise output per worker but may reduce or reallocate jobs in the short to medium term.

Measurement and policy considerations often focus on how capital intensity influences growth and development. Economies seeking productivity gains may invest in infrastructure and automation, while ensuring access to long-term financing and stable demand to justify large capital outlays.

See also: labor-intensive, capital stock, fixed costs, capital efficiency, automation.