Please Explain Why Including General
Equations!
Homework Answers
We have
Output growth rate = growth rate of labor * labor share + growth rate of capital * capital share + growth rate of TFP
Contribution of capital = growth rate of capital * capital share
= 3% * 0.3
= 0.9%
Contribution of labor = growth rate of labor * labor share
= 1% * (1 - capital share)
= 1% * 0.7
= 0.7%
Contribution of TFP = growth rate of TFP
Now growth rate of TFP = Output growth rate - growth rate of labor * labor share - growth rate of capital * capital share
= 3% - 0.7% - 0.9%
= 1.4%
Hence Contribution of TFP = 1.4%
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Please Explain Why Including General
Equations!
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