Question

Suppose you were the economic advisor to the leader of a small, developing country. What advice would you give him or her with respect to how the country could raise the productivity of its labor force? (Hint: What factors increase labor productivity?)

Answer 1

• As an economic advisor I would advise him or her to use combinations of labour and capital to increase productivity of its labour force.
• The Increase in capital can be achieved by either increasing human capital or physical capital.
• The human capital includes ideas and intellectual property while the physical capital includes tools which are important determinants of labour productivity.
• Inorder to achieve the labour productivity growth one must Increase the amount of capital either as human or physical.
• Another important aspect that must be increased is the technical efficiency of workers.
• New techniques and tools must be adapted to increase the productivity. This is termed as specialization.
• Speacialization makes labourers expert in a particular area or a field.