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I am assuming that the production function for the economy has constant returns to scale, and all other inputs stay the same.

These are the steps I have made to try to answer this question:

1) Y/L = Productivity

2) Therefore, if Y=3 and L=2 (There were 2 workers in the economy), so Productivity = 3/2

3) L doubled, so now L=4

4) Now Productivity is equal to 3/4.

5) Productivity has therefore fallen by half of its former value.

Am I right in stating this? If not, can you please explain to me where I am going wrong?

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Since you say holding other variables as they were and double $L(t)$ I assume you have a production function that may include capital $(K(t))$, including this and assuming a Cobb-Douglas production function:

$$ Y(K(t), L(t)) = K(t)^{\alpha} L(t)^{1-\alpha} \; \; 0< \alpha < 1 $$

Doubling $L(t)$ gives, (and omitting $t$ from the writing for clarity):

$$ Y(K, 2L) = K^{\alpha} (2 L)^{1-\alpha} $$

$$ = 2^{1-\alpha} Y(K,L) $$

$$ \Rightarrow \frac{Y(K, 2L)}{2L} = \frac{2^{1-\alpha} Y(K,L)}{2L} $$

$$ \frac{Y(K,L)}{2^{\alpha} L} < Y/L $$

So yes in this sense as you described doubling labour decreased productivity.

You mention $Y$ having constant returns to scale, this implies if you double both $K$ and $L$ then $Y$ will double as well, then productivity will stay the same

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  • $\begingroup$ Does it decrease productivity by exactly half its former value, though? $\endgroup$ – Kelsey Mar 3 '16 at 2:50
  • $\begingroup$ No it decreases by $2^{\alpha}$ which is between $(1,2)$ (not including 1 or 2 by definition of alpha) $\endgroup$ – Sunhwa Mar 3 '16 at 2:55
  • $\begingroup$ Sorry, I will rephrase, for a Cobb-Douglas production function, doubling $L$ has decreased productivity by $2^{\alpha}$ but for some other production function it may be different ... e.g. I believe $Y= L$ would be a trivial case where doubling $L$ equally doubles $Y$ hence there is no change in productivity. $\endgroup$ – Sunhwa Mar 3 '16 at 3:23
  • $\begingroup$ Okay, I was assuming using the production function $Y = A F(L, K, H, N)$, which would become $Y/L = A F(1, K/L, H/L, N/L)$ when measuring productivity ($Y/L$ is output per worker, which is a measure of productivity), but thank you for your interesting contribution. $\endgroup$ – Kelsey Mar 3 '16 at 3:28

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