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An empirical test of marginal productivity theory

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  • Martin Biewen
  • Constantin Weiser

Abstract

We explore an hitherto unused approach to testing marginal productivity theory. Our method rests on the simple idea that, under the assumption of a linear homogeneous production function, residual profits are informative about the discrepancies between factor payments and marginal products. Our empirical application using data on manufacturing plants in Chile suggest moderate deviations from marginal productivity theory which depend on firm size.

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  • Martin Biewen & Constantin Weiser, 2014. "An empirical test of marginal productivity theory," Applied Economics, Taylor & Francis Journals, vol. 46(9), pages 996-1020, March.
    • Handle: RePEc:taf:applec:v:46:y:2014:i:9:p:996-1020
    DOI: 10.1080/00036846.2013.864042
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