Importance of Economic Productivity

Importance of Economic Productivity


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Importance of Economic Productivity

Productivity is vital to an economy since it determines the well being or standard of living inherent within the borders of a nation. Additionally, productivity facilitates the optimal utilization of a nation’s resources to empower economically the nation to acquire goods as well as services not produced within its borders through the process of importing. Various measures such as GDP, unemployment rate and GNP are used to measure a countries productivity as well as economic growth. Productivity entails continual increase in efficiency thus serving as an impetus to innovation and research in a country (Gadrey, 2002).

Education affects productivity by influencing the degree of competence and quality of a nation’s workforce. In nation’s where the literacy level is high, the work force is likely to concentrate on creation of secondary products such as electronics and machinery that are more expensive compared to primary products such as agricultural goods. Education also influences the possibility of innovation as well as quality of research in production processes where a highly trained workforce is likely to incorporate technological advances in the production process thus increasing efficiency and optimization of a nation’s resources (Gadrey, 2002). Education thus decreases the unemployment rate by making most of the potential workforce employable by imparting necessary skills.

Moreover, a nation’s investment in research and development institutions ensures the production processes are continually monitored and improved for efficiency consequently resource optimization. R and D as commonly referred to increases the prospects of innovation in new products or production processes eventually increasing the nation’s economic productivity. Technology affects productivity by lowering production costs or increasing productivity without a corresponding increase in resource use (Ark et al. 2000). For instance, the internet has reduced marketing costs while increasing the potential market segment as well as facilitating a virtual market place and forum for exchanging production ideas.


Ark, B. ., Kuipers, S. K., Kuper, G. H., & Conference “Productivity and Living Standards”. (2000). Productivity, technology and economic growth. Boston. Kluwer Academic. Publishers.

Gadrey, J. (2002). Productivity, innovation and knowledge in services: New economic and socio-economic approaches. Cheltenham. Elgar.