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A_Beginner_s_Guide_to_Growth_Accounting

# A_Beginner_s_Guide_to_Growth_Accounting - ABeginner'...

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A Beginner's Guide to Growth Accounting I.  The Basics: Y = AK α L (1-α29 , 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 (1-α 29 ). then using percentage change rule #3: %Y =  %A +  α∆ %K +  (1-α29∆ %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 8-3 lists the following (all numbers are percentages): 1995-2002 %Y = 3.7 α∆ %K = 1.7 (1-α29∆ %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

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