An empirical test of marginal productivity theory

Martin Biewen and Constantin Weiser

Applied Economics, 2014, vol. 46, issue 9, 996-1020

Abstract: We explore an hitherto unused approach to testing marginal productivity theory. Our method rests on the simple idea that, under the assumption of a linear homogeneous production function, residual profits are informative about the discrepancies between factor payments and marginal products. Our empirical application using data on manufacturing plants in Chile suggest moderate deviations from marginal productivity theory which depend on firm size.

Date: 2014
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DOI: 10.1080/00036846.2013.864042

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