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Marginal Productivity Theory : What Does it Explain – Distribution or Employment?


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1 Assistant Professor, New L J Commerce College, Near Sanand Circle, S. G. Road, Ahmedabad - 382 210, Gujarat, India

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Marginal productivity theory occupies a prime and significant place in the section on distribution in almost all microeconomics textbooks, explaining the determination of factor prices. In fact, historically and logically, it stands as the tallest theory in this group. This paper tried to examine the validity of marginal productivity theory as the theory of distribution. After a series of logical arguments advanced herein, I came to a conclusion that marginal productivity theory explains employment at the micro as well as macro levels, but fails to provide a satisfactory answer to the question of factor pricing.

Keywords

Theory of Distribution, Marginal Productivity, Factor Prices, Perfect Competition

A20, D00, D33

Paper Submission Date : January 11, 2016 ; Paper sent back for Revision : July 6 , 2016 ; Paper Acceptance Date : July 28, 2016.

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  • Marginal Productivity Theory : What Does it Explain – Distribution or Employment?

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Authors

Ketan K. Shah
Assistant Professor, New L J Commerce College, Near Sanand Circle, S. G. Road, Ahmedabad - 382 210, Gujarat, India

Abstract


Marginal productivity theory occupies a prime and significant place in the section on distribution in almost all microeconomics textbooks, explaining the determination of factor prices. In fact, historically and logically, it stands as the tallest theory in this group. This paper tried to examine the validity of marginal productivity theory as the theory of distribution. After a series of logical arguments advanced herein, I came to a conclusion that marginal productivity theory explains employment at the micro as well as macro levels, but fails to provide a satisfactory answer to the question of factor pricing.

Keywords


Theory of Distribution, Marginal Productivity, Factor Prices, Perfect Competition

A20, D00, D33

Paper Submission Date : January 11, 2016 ; Paper sent back for Revision : July 6 , 2016 ; Paper Acceptance Date : July 28, 2016.




DOI: https://doi.org/10.17010/aijer%2F2016%2Fv5i4%2F100770