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A Relationship Between the Factor Indivisibility and the Output Elasticity of the Indivisible Factor

Author

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  • Dipankar Das

Abstract

The paper puts forth a notion and derives a special type of production function where labour is an indivisible factor and is in the integer space. Thus, Newtonian calculus is not an appropriate method of deriving the marginal value because limit point does not exist. This shows that indivisibility determines the output elasticity. In the first part, the paper propounds a notion regarding how indivisibility determines curvature of the production function. In the second part, the paper incorporates the findings within a production function and derives a new type accordingly. Moreover, it formally derives the standard wage equation considering all the entitlements of labour, namely (a) normal wages, (b) interest and (c) rent of ability. So far, no such mathematical proof is there to support this wage composition. This paper, for the first time, derives this wage equation considering indivisibility of labour. JEL Classifications: J23, J24, J31, D24, C61, E24, L8

Suggested Citation

  • Dipankar Das, 2022. "A Relationship Between the Factor Indivisibility and the Output Elasticity of the Indivisible Factor," Studies in Microeconomics, , vol. 10(1), pages 82-105, June.
    • Handle: RePEc:sae:miceco:v:10:y:2022:i:1:p:82-105
    DOI: 10.1177/2321022220985160
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • L8 - Industrial Organization - - Industry Studies: Services

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