Introduction
For every firm to produce goods it needs inputs such as capital and labour. Mankiw (2005) refers to capital set of tools that workers use in the process of production e.g. Machineries such as computers whereas labour refers to the hours that employee invest working. Production function refers to the output of a firm, an industry or an entire economy for all combination of inputs (Banaeian and Zangeneh, 2001).Economists use production function to precise the relationship between labour and capital and according to Mankiw (2005). Production functions reveal the available technology for transforming labour and capital into output.
Tang (2008) highlighted the fact that theory of productivity was proposed by Knut Wicksell in 1851 which contributed a lot towards the works of Charles Cobb and Paul Douglas. Cobb-Douglas production function was developed by Cobb and Douglas in 1928 which is a fundamental function even now in both Macroeconomics and Microeconomics. The Cobb-Douglas production function is normally utilized by economists in the direction of explaining the correlation between contributions of resources involved in production such as labour, capital and technology.Cobb-Douglas production function and constant elasticity of substitution functions are playing a significant role for analysis in economics.
Cobb-Douglas production function is still universally used toward the analysis of productivity and growth (Felipe and Adams, 2005). Felipe and Adam accepted as true that Paul Douglas is one of the economists who deserved a Novel Price for his marvelous works. Cobb and Douglas suggested that elasticity of substitution between capital and labour should be constant or equals to one even though they did not specify ...
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Growth in labour productivity is important because it is associated with economic growth, standards of living, and real incomes. It is another useful tool that we can use to compare the welfare and growth of countries. Labour productivity measures the amount of Real GDP produced by an hour of labour. Increases in labour productivity can occur from increases in the amount of machines and equipment available to workers, a higher proportion of skilled workers, increases in plant scale, changes in organizational structure, and improvements in technology (1).
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Labour Productivity has a great meaning for a development of humankind society, which is a motive for promoting the development of social economy of all nations and as an important base on decisions in the macro and micro range The most general impact is the target of increasing the labour productivity at present is to complete the life quality of people in all over the world, central issue of labour productivity is to ensure a better society through an advanced technique aimed to use more efficiently with the resources and technology in available
While there is no disagreement on this general notion, a look at the productivity literature and its various applications reveals very quickly that there is neither a unique purpose for, nor a single measure of, productivity. But many different productivity measures are available but choice to apply which depends on the purpose of productivity measurement and in many times on the available of data. Productivity measure in general can be categorised as either single factor productivity or multifactor productivity measure depends on the measure of output to input (OECD 2001). An economy only increases if the people “works smarter” and acquire more output from a given supply of