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This chapter spells out the theoretical framework for the discussion and case studies of the book. First, it provides precise definitions of technological change and classify technological change into different types based on their factor intensities. The discussion starts off with a single farm household. Two key concepts for understanding how that household will respond to technological changes are economic incentives and constraints. The former relates to how new technologies influence the economic return of different activities. The latter has to do with how the technologies modify the labour and capital constraints that farmers face. Then, the chapter shifts to the macro level and discusses how aggregate changes in output supply and input demand affect prices, wages, and migration. Such general equilibrium effects can modify or even reverse the conclusions obtained when only considering the individual farm households.
