what is the one third rule 
the one third rule estimates change in labor productivity based on changes in capital devoted to labor the rule is used to determine the impact that changes in technology or capital have on production understanding the one third rulelabor productivity is an economic term that describes the cost of a worker s hourly production based on the amount of gross domestic product gdp spent to produce that hour of work in particular the rule asserts that for an increase of 1 in capital expenditures to labor a resulting productivity increase of 0 33 will happen the one third rule further assumes that all other variables remain static so no changes in technology or in human capital occur human capital is the knowledge and experience a worker has using the one third rule an economy or business may estimate how much technology or labor contributes to overall productivity as an example say a company experiences a 6 increase in capital for an hour of labor for a given period in other words it costs more to employ workers at the same time the company s stock of physical capital also increased by 6 using the equation increase in productivity 1 3 increase in physical capital labor hours increase in technology one could infer that 4 of the increase in productivity was due to advancements in technology 