Marginal Product Of Labor Research Articles

Demand Drivers of Female Labor Force Participation: Evidence From Selected African Countries

Abstract This study investigates the demand drivers of female labor participation in a panel of twenty (20) selected African countries across five sub-regional groupings (West Africa, East Africa, North Africa, Central Africa and South Africa), over the period 1990-2015. The study sourced data from World Bank Data Bank. Poverty and gender inequality in employment were used and measured respectively by life expectancy at birth and gender ratio in labor participation. Other variables included are wage rates, female marginal labor productivity and household income. Autoregressive Distributive Lags (ARDL) procedure of dynamic panel model was used. The result from the Dynamic Fixed Effect (DFE) revealed that female marginal productivity of labor and gender inequality in employment have a significant positive impact on demand for female labor in the long run, however female marginal productivity was found negative in the short run. It is therefore important that, in order to bridge the gender gap in employment, government should ensure gender sensitive policies and remove all forms of institutional barriers to female labor demand. Efforts should also be made to improve female productivity through training, literacy and household food security. In order for female demand to meet desired response, adequate support services and provisions that can entice female to work outside home should be provided.

Effect of Companies Income Tax on Profitability of Deposit Money Banks (DMB’s): A Study of DMB’s with International Operating License in Nigeria

Banks in Nigeria have operating strata ranging from regional to international-the study examine the how Companies Income Tax (CIT) affects Corporate profitability of Deposit Money Banks (DMB’s) as obtained from their annual report for 2017 using their Return on Assets (RoA) as Profitability parameter. OLS method was used via SPSS 20.0 to run the data used in the research with findings that; there exist a strong positive relationship between CIT and Corporate Profitability of Deposit Money Banks (DMB’s) in Nigeria and recommends a reduction in CIT rate with attendant increase in Education Tax (EDT) since buoyancy of the education sector (ceteris paribus) is expected to transcend in enhancement of Marginal Productivity of Labour which have positive spill over effect on Corporate Profitability in the longrun. Keywords: Companies Income Tax (CIT), Corporate Profitability, Deposit Money Banks (DMB’s) DOI : 10.7176/DCS/9-4-12 Publication date : April 30 th 2019

Minimum wage effects across heterogeneous markets

Previous studies have reached little consensus on the employment effect of the minimum wage. This paper argues that local labor markets are heterogeneous, in that the impact of the minimum wage is concentrated in specific markets. In particular, we estimate the extent of surplus between each plant’s value of marginal product of labor and wage rate and examine whether the minimum wage impact varies across markets with a differential surplus. Building on the recent policy changes in Japan, we find that the employment effect of an increase in the minimum wage is significant and negative in plants for which the value of marginal product of labor is close to the wage rate and which experienced little surplus pre-reform. The minimum wage increases have little employment effect on plants with a relatively high surplus, even when they have a significant number of minimum wage employees.

The impact of monetary and tax policy on income inequality in Japan

AbstractThis paper assesses the effects of the most recent monetary policy behaviour of the Bank of Japan (in particular, zero interest rate policy and negative interest rate policy) and Japanese tax policy on income inequality in this country during the period of 2002Q1 to 2017Q3. The vector error correction model (VECM) that develops in this research shows that increase in money stock (m1) through Quantitative Easing (QE) and Quantitative and Qualitative Easing (QQE) policies of theBOJsignificantly increases the income inequality. On the contrary, Japanese tax policy was effective in reducing the income inequality. Variance decomposition results show that increasing of income inequality by monetary policy is larger when comparing to decreasing effects of tax policy on income inequality. Cointegration andVECMresults show that monetary policy has both short‐run and long‐run impacts but for tax policy paper could not find any significant short‐run impact on income inequality. In addition, paper found that technological progress only in long‐run can reduce the income inequality by increasing the marginal productivity of labour with positive impacts on employment and wages.

Is Bangladesh’s Economy Approaching the Lewis Turning Point?

During the last decade, Bangladesh economy grew consistently over 6 per cent annually; however, growth rate in the agriculture sector declined. Labour away from agriculture is evident; it is also evident real wages in the agriculture sector are rising. This could be an indication that Bangladesh is moving to a different stage of economic development. This article investigates whether Bangladesh is approaching a stage of economic development where marginal productivity of labour equals its price, called the Lewis turning point (LTP). We find that the reallocation of labour away from agriculture has had a positive but insignificant impact on economic growth in Bangladesh. We also find that the surplus agricultural labour has not fully been absorbed by the economy. Therefore, we conclude Bangladesh has yet to reach the LTP and suggest initiating policies (e.g., job creation in the service sector) that might speed up the country’s movement to the LTP.JEL: O11, O17, O41, O53

A fundamental externality in the labour market? Ragnar Frisch on the socially optimal amount of work

In the late 1940s, Ragnar Frisch published two articles in Norwegian that constitute a pioneering attempt to apply welfare economics to a problem of economic policy. The main contention of the articles is that there exists a fundamental externality in the labour market because the marginal productivity of labour depends both on input in the individual unit and on total labour use in the economy. While inspired by the problems of post-war reconstruction, Frisch came to regard it as a general problem in a decentralized economy, and he explores its consequences for wage and tax policy. While Frisch attached great importance to the analysis, it has received little attention in the subsequent literature.

Research on China’s “Lewis Turning Point” and Efficiency Analysis of Each Province—Based on DEA and SFA Methods

Based on the current situation of China’s labor market, this paper studies whether China crosses the “Lewis Turning Point” in 2009-2017. Research shows that China has not yet entered the “Lewis Turning Point”. This paper uses the marginal productivity of labor as the criterion for judging the problem and calculates the capital stock through the perpetual inventory method to further estimate the production function and the marginal productivity of labor. Although China has not entered the “Lewis Turning Point”, due to the heterogeneity between cities, some cities may have entered the “Lewis Turning Point” in advance. This paper further analyzes the provinces of China and uses DEA and SFA methods to analyze the efficiency of capital stocks and labor input in various provinces. The results show that some cities are inefficient due to excessive labor input. China can transfer labor through a reasonable labor policy, thereby avoiding labor shortages in some cities and ultimately improving the efficiency of resource allocation in each province.

Measuring Trends and Persistence in Capital and Labor Misallocation

We analyze trends and persistence in the misallocation of labor and capital using firm-level panel data for the Netherlands in the period 2001-2017. We use the dispersion in marginal revenue products of labor and capital to measure the extent of misallocation. Compared to a counterfactual efficient allocation we find that misallocation has had a sizable negative impact on aggregate productivity. Especially capital misallocation has increased over time. The relatively high and rising capital misallocation is caused by a combination of small, highly productive firms facing relatively high capital wedges and large and unproductive firms facing relatively low capital wedges. Exploiting a panel data error components model we find that capital misallocation has a much more permanent character than labor misallocation. Moreover, it is the permanent component of capital misallocation that has increased over time. Finally, we show that in our sample the measurement of misallocation is largely insensitive to capital adjustment costs and alternative specifications of the production function. The contribution of heterogeneous markups to observed misallocation, however, is non-negligible.

Factor Reallocation and Growth: What if There Are Labor Saving Innovations?

We claim that the standard methodology to study the effects of the reallocation of factors on growth is not adequate in the presence of biased innovations. Labor-saving innovations increase output per worker and may decrease the marginal productivity of labor. Therefore, a reallocation of labor from a sector with higher output per worker to a sector with lower output per worker may be productivity enhancing.

A Theory of Entrepreneurial Work

This research is inspired by Baumol’s lifetime effort in introducing the entrepreneur to mainstream economics. The paper examines entrepreneurial work and suggests a return to classical economic theory of the entrepreneur in the tradition of Max Weber and Joseph Schumpeter. We assume entrepreneurial work to be the intrinsic character of the entrepreneur, who divides her working time into subsistence and entrepreneurial productions. The entrepreneur taking pleasure from entrepreneurial work is the crucial conjecture of our analytical model. The model predicts 1) maximum utility can be reached if and only if the market value of the marginal product of labor in subsistence production is greater than that in entrepreneurial production; 2) government interventions artificially alternating the price of subsistent production may lead to misallocation of limited labor time into the two productions.

Bequests, Imperfections in Factor Markets, and Long-Run Inequality: A Theoretical Assessment of Piketty

The book Capital in the Twenty-First Century by Thomas Piketty (2014) has renewed the public and scholar debate about wealth and income inequality. Theoretical critiques have focused their attention on a regularity pointed out by the author, namely, the growth rate of the economy is lower than the interest rate, r > g. However, two other important insights are key to understand the persistence of inequality: bequests and differences between factor prices and the marginal productivity of factors. We present an OLG model that incorporates these two elements and explores under which circumstances inequality between two social groups, rich dynasties and poor dynasties, is a long-term equilibrium result with economic growth. The model considers two goods, one essential and the other non-essential. We find that inequality between rich and poor dynasties is a long-term equilibrium when (i) the marginal productivity of labor of the essential good is bounded from above and the marginal productivity of capital in the non-essential good sector is bounded from below by a positive value; and (ii) factor remunerations are not determined by the standard economic forces of marginal product.

On the Origins and Legacies of Really Existing Capitalism: In Conversation with Kari Polanyi Levitt

On the Origins and Legacies of Really Existing Capitalism: In Conversation with Kari Polanyi Levitt

Hick’s Contribution to the Development of the IS-LM Model Was Limited to Drawing the IS-LM Figure or Diagram: Keynes Was the Originator and Theoretical Developer Who Presented the Complete IS-LM(LP) Model, Supported by the D-Z Model, in the General Theory on pages 298-303 in Section Four of Chapter 21

Hicks, in the last paragraph of the last page of his April,1937 Econometrica paper dealing with a “suggested interpretation” of the General Theory, correctly concluded that his “skeleton” model represented a small improvement over Keynes’s similar “skeleton” model of the General Theory. This “small” improvement was, presumably, Hicks’s actual drawing of the IS and LM curves in Aggregate Income and rate of interest space. The major defect in Hicks’s IS-LM model, when compared to Keynes’s IS-LM(LP) model of chapter 21 of the General Theory, is an error of omission, not commission. The problem, mentioned to Hicks in Keynes’s reply to Hicks, was that Hicks had no D-Z model serving as a foundation for the IS-LM model that would have incorporated the missing expectations concerning the price level, theory of the firm, production function, labor market, and marginalist conditions, like Keynes’s chapter 20 result that the real (expected) wage equals the marginal product of labor, that Keynes had incorporated in his D-Z model of expected aggregate demand and expected aggregate supply. In Hicks’s 1980-81 paper in the JPKE, which offered an explanation for the IS-LM model, Hicks, correctly, states clearly that his contribution to the IS-LM model was the IS-LM graph or diagram. He later correctly stated that it was Keynes, who had a model with three elements that was analyzed with two parameters in Aggregate (effective demand) Income-rate of interest space in chapter 21, whose model he was interpreting. This is just another way of stating what he had stated in the last paragraph of his 1937 Econometrica paper, which was that his “skeleton” was a small improvement over the original Keynesian “skeleton”. The first IS-LM model was presented by Keynes in December ,1933,in his student lectures attended by D. Champernowne and W. Brian Reddaway, whose June, 1936 papers in the Economic Record and Review of Economic Studies, respectively, incorporated versions of the IS-LM model contained both in Keynes’s December, 1933 lectures and in his mid 1934 draft copy of the General Theory, where the confidence in one’s expectations variable had replaced the “change in the news” variable, W, as pointed out by Dimand and Rubin. The Reddaway and Champernowne papers appeared 11 months before Hicks’s April, 1937 paper on IS-LM and the General Theory. Hicks’s June, 1936 review of the General Theory in the Economic Journal not only has absolutely no discussion of any type of IS-LM model, but claims, partly correctly, that Keynes’s discussion of expectations was what was truly important and original in Keynes’s General Theory.

Граничний продукт праці як критерій ефективності формування ціни праці в сільськогосподарських підприємствах

Граничний продукт праці як критерій ефективності формування ціни праці в сільськогосподарських підприємствах

Samuelson’s Neoclassical Synthesis Did Not Betray Keynes: Keynes Had Offered Just Such a Synthesis in the General Theory, As Well As to Hicks and Harrod in Correspondence, in 1936

In a recent reprint of material taken from R. E. A. Farmer’s recent 2017 book, Prosperity for All, certain misrepresentations of Paul Samuelson’s work and J M Keynes’s work is presented. For example, in the presence of a high unemployment rate, following a severe recession or depression, Samuelson’s prescription is the use of expansionary fiscal policy that involves large government deficits to finance major public works, public goods, and public infrastructure spending to replace the large gap resulting from the collapse in private investment spending. This will increase p, the general price level, while reducing the real wage, w/p. This will result in an increase in employment and a fall in the unemployment. The unemployment rate will start to move back toward the full employment target rate of 4 %. The problem is not that money wages are too high, but that, due to decreased private corporate investment spending, spending on investment goods is too low, so that the overall price level is too high, resulting in a higher than optimal real wage. This higher real wage is misinterpreted as being due to money wages that are too high, while, in reality, it is due to insufficient spending on investment goods that is too low. J M Keynes, in December 1933, invented and taught the IS-LM(LP) model. An inferior version of it was developed by Keynes and appeared in the mid 1934 draft copy of the General Theory. An improved, revised version of it was presented in the General Theory in chapter 15 and chapter 21 on pp.298-299 in 1936. The aggregate price level was not determined in Keynes’s IS-LM(LP) model. It is determined by Keynes in a separate, supporting model, which Keynes called his D-Z model, which appeared in chapters 20 and 21. Keynes developed the Aggregate Supply Curve (ASC) in aggregate Income-employment (D, Y, Z; N) space. This ASC represents a locus of all multiple equilibrium, optimal D=Z outcomes, all of which satisfy the necessary and sufficient first and second order conditions for an expected profit maximum. The first order conditions are that the expected real wage equals the marginal product of labor. Keynes presented two simplified versions of his ASC on pp.295-296 of the General Theory, which has the familiar completely horizontal, completely elastic, range of the standard textbook aggregate supply curve in (O,P) space where O=a function of N, and PO equals aggregate income. PO is Keynes’s Y; pO, expected aggregate income, is Keynes’s D. N is aggregate employment. Both Keynes and Samuelson realized that Frisch’s reconstituted version of K. Wicksell’s rocking horse (pendulum) model could only involve negative feedback. It does not, and could not, involve the positive feedback effects resulting from the interaction of the multiplier and accelerator models, first presented by Keynes in his correspondence with Harrod in August, 1938, in discussions over his economic growth model using a first order, difference equation, and simultaneously presented by Samuelson in 1939-1941 by the use of difference equations. Microeconomic optimizing approaches, (individual, rational utility maximizing and profit maximizing problems) based on pendulum models, which have purely negative feedback effects that are self-correcting over time, have no explanatory significance or policy application at the macro level. All that it is possible to say at the macro level is that the dynamic equilibriums are either stable or unstable. It is impossible to conclude that they are optimal or non-optimal in terms of aggregate employment or aggregate “output”.

Impact of land fragmentation on marginal productivity of agricultural labor and non-agricultural labor supply: A case study of Jiangsu, China

In the context of China's rapid economic development, numerous rural laborers go out to work driven by economic interests. How to release the surplus rural labor effectively is critical for the further development of urbanization in China. Land fragmentation is a basic characteristic of agricultural production in China. Land fragmentation also affects labor use. In the current process of China's rural reform and urbanization, large amounts of surplus rural labor will continue to transfer to urban and non-agricultural sectors in the near future, and the transfer mode will turn from individual migration to family migration. Marginal productivity of agricultural labor has an important influence on farmers' labor decisions. Using household survey data collected from Jiangsu province in China, this study analyzes the theoretical mechanism, and empirically tests the direction and degree of the impact of land fragmentation on marginal productivity of agricultural labor and non-agricultural labor supply. The results reveal that land fragmentation decreases marginal productivity of agricultural labor and increases non-agricultural labor supply. This effect is especially obvious for young agricultural workers. Supplementing relevant policies and preferential measures, the government should guide farmers to realize joint land operation and transfer of farmland management rights on a voluntary basis. Further, it is necessary to increase the supply of mechanized services and facilitate the development of small-sized agricultural machine that can be used on smaller landholdings.

Misallocation and the Credit Cycle: Evidence from Europe

Using a large firm level dataset, that covers 18 European countries in the 2006-2014 period, I develop an empirical approach in the spirit of Rajan and Zingales (1998) in order to study whether and to what extent the credit cycle influences the efficient allocation of resources across firms. I document that a higher availability of credit leads to a decline in both capital and labor misallocation, suggesting that, when credit is above its trend, the additional funds flowing in the economy reduce financial frictions, allowing financially constrained but productive firms to implement their projects. The estimated effect explains 7.8% and 5.8% of the variation in the within-sector dispersion in the marginal revenue products of capital and labor respectively, and it is consistent with respect to a wide range of robustness checks. It is larger when evaluating exclusively the manufacturing industry or countries with relatively small domestic credit markets, while tends to disappear for financially developed economies.

Corruption and paradoxes in alliances

In order to study corruption when a person can adjudicate over property rights, we extend the Tullock contest model by letting identical workers and a non-productive enforcer, who is more effective at fighting, contest over a resource. Property rights for output are well defined, but it is not so for the resource. If the enforcer assigns the resource in the way he was mandated, then the grand coalition forms with no corruption. There is corruption if he colludes with a subset of the workers and gets a transfer; this coalition then fights over the resource against other groups of workers. For general cost effort functions, if the enforcer is effective enough and marginal productivity of labor is adequately low, addition of the enforcer to a coalition increases the sum of payoffs of its members and generates negative externalities on other coalitions; that is, to divide and rule becomes an attractive prospect. This matches the empirical association between corruption and labor productivity or income inequality.

Female labor supply, fertility rebounds, and economic development

AbstractWe show that a fertility rebound can occur as the female wage rate rises concomitantly with economic development. Under plausible conditions, capital accumulation raises the marginal product of labor and hence the female wage rate. Unless the economy is trapped in a lower equilibrium, the fertility rate starts to decline at a certain level of the female wage rate and then turns upward at a higher wage level, presenting a fertility rebound. For such fertility rebounds to appear without policy intervention, the availability of external child care at high female wage rates is crucially important. The external child‐care price must be lower at high female wage rates. Otherwise the fertility rate might continue to decline.

The importance of intangible capital for the transmission of financial shocks

This paper studies the role of intangible capital in the transmission of financial shocks in a general equilibrium model with two types of capital, tangible and intangible, and labor and financial frictions. We find that intangible capital, which cannot be used by financially constrained entrepreneurs as collateral, is key to generate labor market volatility in response to financial shocks. When hit by an adverse financial shock, entrepreneurs prioritize investment in pledgeable assets to offset the tightening of financial conditions. This results in a strong cutback in intangible investment, which in turn leads to a decline in the marginal product of labor, vacancies and employment. In an alternative specification—one without intangible capital—when hit by an adverse financial shock, entrepreneurs instead fund tangible investments by reducing their consumption. As a result, capital and the marginal product of labor fall less than in the model with intangible assets, resulting in a smaller decline of employment and output.