An example will help to illustrate the basic way that labor productivity growth works through increa

An example will help to illustrate the basic way that labor productivity growth works through increa

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An example will help to illustrate the basic way that labor productivity growth works  through increases in the capital stock. Say there is a riveter named Joe. Joe works in a  factory that makes metal boxes that are riveted together. He has a riveting tool that can  rivet at a rate that allows Joe to finish 4 metal boxes every hour. Joe's labor productivity  is thus 4 boxes per hour. One day, Joe gets a second riveting tool. With two tools, Joe  can produce 8 metal boxes every hour. Now Joe's labor productivity has increased from  4 boxes per hour to 8 boxes per hour. The increase in the physical capital available to  Joe, that is, a second tool, allowed this increase in Joe's labor productivity. For every  hour of work Joe puts in, he can produce 100% more output due to an increase in the  physical capital available to him.  Another example may also be of use. Say there is a chef named Susan. Susan can 
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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