Conclusion
In this paper an attempt has been made to reconcile the phenomenon of a simultaneous increase in average labour productivity and labour intensity with neo-classical theory. Under certain technical and psychological conditions, this phenomenon can indeed be generated by a neo-classical model, once it has been assumed that production does not only depend on labour and the number of capital goods but on the operating-hours per machine as well. A necessary condition is that the elasticity of substitution is less than unity. Moreover, the elasticity of the degree of overtime aversion with respect to the number of operating-hours per machine has to be negative and smaller in absolute value than the substitution coefficient.
Today almost everybody agrees that in reality the elasticity of substitution is less than unity. So, the technical condition may be called realistic. However, it is doubtful whether this is the case with the psychological condition. It seems rather unrealistic that the aversion against overtime work decreases if one has to work at more inconvenient hours.
Thus, we may conclude that it is doubtful whether amended neoclassical theory is able to give a realistic explanation of the phenomenon of simultaneously increasing labour intensity and labour productivity. In this respect approaches which discern the phenomenon of labour hoarding [5] or employ U-shaped short-run cost curves [2], may be more promising.
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References
F. J. de Jong: Dimensional Analysis for Economists, Amsterdam, 1967.
S. K. Kuipers: De betekenis van vraag-en aanbodfactoren in groeimodellen met één sector, mimeographed doctoral thesis, Groningen, 1970.
R. E. Lucas Jr.: Capacity, Overtime and Empirical Production Functions, The American Economic Review, Papers and ProceedingsLX (1970), pp. 23–27.
R. Marris: The Economics of Capital Utilization, Cambridge 1964.
A. M. Okun: Potential G. N. P.: Its Measurement and Significance, Proceedings of the Business and Economic Statistics Section, American Statistical Association, 1962, pp. 98–104.
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I wish to thank Professors F. Hartog, F. J. de Jong, and G. F. Pikkemaat, and Mr. J. W. Gunning for making useful comments on a first draft of this paper.
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Kuipers, S.K. The positive relation between average labour productivity and labour intensity. Zeitschr. f. Nationalökonomie 33, 115–126 (1973). https://doi.org/10.1007/BF01283314
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DOI: https://doi.org/10.1007/BF01283314