Productivity and growth policies Consider a small island country whose only industry is fishing. The following table shows information about the small economy in two different years.
Complete the table by calculating physical capital per worker as well as labor productivity.
Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor.
| Year | Physical Capital | Labor Force | Physical Capital per Worker | Labor Hours | Output | Labor Productivity |
|---|---|---|---|---|---|---|
| 2028 | 80 | 20 | 900 | 7200 | ||
| 2029 | 180 | 60 | 3900 | 23400 |
Based on your calculations, in physical capital per worker from 2028 to 2029 is associated with in labor productivity from 2028 to 2029.
Suppose you’re in charge of establishing economic policy for this small island country.
Which of the following policies would lead to greater productivity in the fishing industry? Check all that apply.
a. Sharply increasing the interest rate on student loans to people pursuing advanced degrees in fishing
b. Encouraging saving by allowing workers to set aside a portion of their earnings in tax-free retirement accounts
c. Offering free public education to every worker in the country
d. Subsidizing research and development into new fishing technologies