Question

what have we learnt from the major studies of critical role of productivity in economic growth

Answer 1

                                    Productivity is a measure of efficiency of production which is often expressed as the ratio of aggregate output to a single input or the aggregate input used in a production process over a specific period of time. For example, labour productivity is defined as the GDP per worker. It is a major factor in the performance of production of all the countries as the rate of the productivity is a key determinant of the economic growth.

                                    An increased national productivity means an improved standard of living as more real income levels helps in the ability of the people to purchase more goods and services, improve the housing patterns, promote educational attainment etc. It also helps the business to be more profitable. Productivity is an important factor that indicates and quantifies how well the economy is making use of the available resources by relating the quantity of output to the quantity of input. It defines a situation where the country’s capital and labour are put together to produce more with the same level of factor inputs. Higher productivity can lead to the following and hence would have an impact on the economic growth of the nation.

· Lower unit costs which can be transferred to the consumers as lower prices which would encourage higher demand, more output and an increase in the employment.

· Higher profits, which arise from the efficiency gains of firms and can be reinvested which can support the long-term business growth

· With lower unit costs, the competitiveness within an economy would be improved which could lead to better trade performance

· It could lead to a higher wage pattern within an economy and hence could result in better efficient working class.

· The GDP output can be improved on a considerable scale which would represent a better economic growth for the nation.

· Labour can be released from one industry and can be made available to other firms if productivity is improved in one firm which would lead to the overall development in the economy.

                                            All of the above factors states that an improved productivity is always an aid for improved economic growth of a nation.