Marginal Productivity and Growth

M arginal productivity theory plays a central role in neoclassical growth theory. It has also been much used in empirical work to identify the factors responsible for growth, for if marginal productivity theory is accepted in its entirety, the contribution of particular factors of production to growth can be derived quite straightforwardly from published statistics. 1 With no other theory can it be claimed that the contribution of, for instance, engineers to the growth rate can be measured. However, according to simpliste marginal productivity theory where perfect competition in factor and product markets is assumed, their contribution will be precisely the rate of increase in an economy’s ‘stock’ of engineers, times the share of the National Income which engineers receive. Much skill and ingenuity may be needed to estimate these, because this information may not be published in precisely the form needed for the calculation. However, this kind of calculation is relatively straightforward. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.