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Unformatted text preview: A Beginner's Guide to Growth Accounting I. The Basics: Y = AK α L (1α29 , where A is a measure of the level of technology called “total factor productivity,” or “multi factor productivity.” Y can be thought of as the product of 3 factors, so that via percentage change rule #1: ∆ %Y = ∆ %A + ∆ %(K α ) + ∆ %(L (1α29 ). then using percentage change rule #3: ∆ %Y = ∆ %A + α∆ %K + (1α29∆ %L, where α is the share of income going to capital, traditionally estimated to be about 0.3 . II. How the estimates are derived: Mankiw's Table 83 lists the following (all numbers are percentages): 19952002 ∆ %Y = 3.7 α∆ %K = 1.7 (1α29∆ %L = 0.9 ∆ % Α = 1.1 In reality, Mankiw started with the following numbers: ∆ %Y = 3.7, ∆ %K = 5.7, ∆ %L = 1.3. He got the first two numbers from the Department of Commerce. The average 1....
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This note was uploaded on 03/02/2010 for the course ECON 57 taught by Professor Woglom during the Spring '08 term at UMass (Amherst).
 Spring '08
 Woglom

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