I am comparing productivities of two industries.
APK= Average Productivity of Capital
MPK= Marginal productivity of capital
APL= Average productivity of labour
MPL= marginal productivity of labour. 1 and 2 are the two industries/firms.
I have got the following results:
1) APK1 >APK2
2) APL1MPK1
4)APL1>MPL1
5)APK2MPL2
7) MPK1>MPK2
8) MPL1>MPL2
What is the interpretation of the above results? Which industry/business is more productive and should be promoted?
Thank you for your answer. I have calculated Multifactor Prodoctivity Index for both the sectors. Sector's 1 index is slightly higher and is significant at 10% probability level.
Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker” - Paul Krugman
Specific actions can promote one type of productivity and have an adverse effect on the other. The more intensive use of one substitute input which increases production and thus average labor productivity, can at the same time have a negative impact on the marginal productivity of labor.
The unit of measure of MP and AP shoul be in phisical terms. The proposed question, however, refers to two different "sector", so that I understand that such productivities are measured in term of the value of the output. But when we consider the value of production we have to use prices. If not all makets involved are perfectly competitive (which is usually the case) the related prices are not all equally "efficient", so that in that way we might introduce serious distortions. It follows that in order to judge which sector should be "promoted", we ought to have firther informations about the marked regimes in the two sectors.
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