Macroeconomists have devoted a great deal of effort to understanding the determinants of labor productivity. They’ve generally emphasized variables such as capital stock per worker, technology, the quality of the workforce, and laws and regulations that govern production. Recent research has shown, however, that this conventional view may leave something out: the degree of competitive pressure faced by a production unit. In “Ores and Scores,” Satyajit Chatterjee examines two cases in which increased competition in the product market caused dramatic improvements in labor productivity: iron mines in the Midwest and public schools in Milwaukee.
This article appeared in the First Quarter 2005 edition of Business Review.View the Full Article