A Relationship Between the Factor Indivisibility and the Output Elasticity of the Indivisible Factor. (June 2022)

• Record Type: Journal Article
• Authors: Das, Dipankar
• Is Part Of: Studies in microeconomics. Volume 10:Number 1(2022)
• Page Start: 82
• Page End: 105
• Publication Date: 2022-06
• Subjects: Indivisibility -- Stochastic output elasticity of labour -- wage equation -- service industry -- fuzziness -- convex production function.; Microeconomics -- Periodicals; 338.505
• DOI: 10.1177/2321022220985160
• Languages: English
• ISSNs: 2321-0222

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