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

Dipankar Das ()

Studies in Microeconomics, 2022, vol. 10, issue 1, 82-105

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

Keywords: Indivisibility; Stochastic output elasticity of labour; wage equation; service industry; fuzziness; convex production function. (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1177/2321022220985160

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