# What Is an Extensive Margin?

Extensive margin refers to the range to which a resource is utilized or applied. For example, the number of people working is one measure that falls under the heading of extensive margin.

By definition...

"split the overall level of work activity into the number of individuals in work and the intensity of work supplied by those in work. This reflects the distinction between whether to work and how much to work at the individual level and is referred to, respectively, as the extensive and intensive margin of labour supply. At the aggregate level the former is typically measured by the number of individuals in paid employment and the later by the average number of working hours." - Blundell, Bozio, Laroque

By this definition, you can (roughly) categorize extensive margin as how many resources are employed as opposed to how hard (intensively, even) they are employed. This distinction is important because it helps to separate and categorize changes in resource usage. In other words, if more of a resource is used, it's helpful to understand whether this increase is because more resources are put to work (i.e. extensive margin increases) or because the existing resources were used more intensively (i.e. intensive margin increases). Understanding this distinction likely has consequences for proper policy response. It's also helpful to note that such a change is often due to a combination of changes in extensive and intensive margin.

In a slightly different interpretation, extensive margin can be thought of as, for example, number of hours worked, whereas intensive margin in this interpretation would refer to the level of effort exerted. As it relates to the production function, extensive margin and intensive margin can be thought of as substitutes to some degree- in other words, one could produce more output by either working longer (extensive margin) or working harder or more efficiently (intensive margin). This distinction can also be seen by looking at a production function directly:

Yt=AtKtα(etLt)(1−α)

Here, changes in L (amount of labor) count as changes in extensive margin and changes in e (effort) count as changes in intensive margin.

The concept of extensive margin is also crucial in analyzing world trade. In this context, extensive margin refers to whether a trading relationship exists, whereas intensive margin refers to how much is actually traded in that trading relationship. Economists can then use these terms to discuss whether changes in the volume of imports and exports are due to chenges in extensive margin or intensive margin.

For more information and insight, you can contrast extensive margin with intensive margin. (Econterms)

Terms related to Extensive Margin:

Source

THE ROLE OF EXTENSIVE AND INTENSIVE MARGINS AND EXPORT GROWTH, NBER Working Paper.

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