Mod 38_ Productivity and Growth.docx - Justin Sousa 1 Mod 38 Productivity and Growth Accounting for Growth The Aggregate Production Function The

Mod 38_ Productivity and Growth.docx - Justin Sousa 1 Mod...

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Justin Sousa 1December 15, 2016Mod 38: Productivity and GrowthAccounting for Growth: The Aggregate Production Function-The aggregate production function shows how productivity depends on physical capital per worker and human capital per worker as well as the state of technology (function below)-GDP per Worker = T*(physical capital per worker)0.4*(human capital per worker)0.4-T is the estimate of the level of technology -An aggregate production function exhibits diminishing returns to physical capital when, holding the amount of human capital per worker and the state of technology fixed, each successive increase in the amount of physical capital per worker leads to a smaller increase in productivity-Economists use growth accounting to estimate the contribution of each major factor in the aggregate production function to economic growth-Total Factor Productivity is the amount of output that can be achieved with a given amount of factor inputs-When total factor productivity increases, the economy can produce more output with the same quantity of physical capital, human capital, and labor
Justin Sousa 2December 15, 2016What About Natural Resources?-Countries with fertile land and rich minerals naturally have more GDP per capita than those that are less fortunate in terms of natural resources-

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