Ancillary Activity and Productivity

Abstract

Administrative tasks, bureaucracy lead to more constraints in the enterprise, we propose to consider explicitly these activities in the production theory and its implications on productivity and economic growth. We propose an alternative production function which encompasses not only inputs needed for the production of the good sold on the market (the core production), but also explicitly all administrative and logistic departments (the ancillary activities). We assume complementarity between them. The main contribution of this paper is the determination of ancillary inputs productivity and therefore their retribution. In the last section we give two succinct applications of our model. The first application concerns the Productivity Paradox debate. Indeed, the impact of a technological innovation depends with the model if it is ancillary oriented or not. Complementarity assumption prevents any spillover effects between activities. The second application is about growth theory. The model explains the mechanism at work about why bureaucracy hampers economic growth. Again the complementarity assumption is all the story.