What is the importance of productivity in an economy?

Expert Answers
Ashley Kannan eNotes educator| Certified Educator

Productivity enhances economic viability.  In other words, the more productive a company or endeavor is, the greater the chance it will endure and flourish in a given economy.  I think that productivity is important because the marketplace ends up determining what companies survive and which end up folding.  The defining factor is a company's productivity, resulting how it is impacting the marketplace.  If a company is not experiencing high levels of productivity, it is not being validated by the marketplace and there is little, if any, justification for it to continue if it is losing money and not being productive.  Conversely, if an endeavor has been received well by the marketplace, it will continue to flourish and experience a validation by the marketplace.  This ends up suggesting that productivity is highly essential in an economy, as it generates greater wealth production for it.

pohnpei397 eNotes educator| Certified Educator

To put it briefly, productivity determines how rich a country can be.  Without high levels of productivity no country can get to the point where it has a high level of GDP per capita and a high standard of living for its people.

The reason for this lies in the definition of productivity.  Productivity is the amount of value that a worker in a given economy can produce for each unit of time worked.  In other words, higher productivity means that a higher value of product is being produced by each worker each hour (or other amount of time).

If you have low productivity, you need lots of people to make amount X of money.  That money has to be distributed among many workers and wages (and GDP per capita) are low.  The opposite applies in high productivity economies.

krishna-agrawala | Student

Productivity refers to the the extent to which productive resources of an economy like its manpower are being used effectively. The productivity is an important contributor and indicator of the total economic prosperity.Particularly manpower productivity can be directly related to the per capita earning of the people in an economy or a country.

Productivity of other inputs like capital equipment indicates how well or effectively the resources of the economy are being used.

The productivity of any one type of input such as manpower can be achieved by several different means such increasing efficiency of the input, using more of other inputs like capital and energy and using better technology.