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1. Consumption-saving decision of the Consumptionhouseholds, 2. Investment decision of the firms, and 3. Purchases of the government • These demands jointly determine the equilibrium
Wages, rental rate, output Wages, 22 Growth Accounting
∆Y/Y = ∆A/A + α(∆K/K) + (1 - α)(∆L/L) • This is the growth accounting equation growth • Its purpose is to separate
The output growth due to the accumulation of The inputs, and The output growth due to productivity increases The 23 The Labor Market TOPIC 5 24 Individual Labor Supply
• Effect of a temporary increase in the real wage temporary
(i.e., holding wealth constant) The Substitution effect: The Substitution
When current real wage (w = W/P) ↑, opportunity cost of When leisure ↑ This tends to ↑ labor supplied This The Income effect: The Income
Higher wages imply that you can work less and make the same Higher income as before This tends to ↓ labor supplied This We assume that the substitution effect dominates We T...
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This note was uploaded on 03/02/2010 for the course BUAD 350 taught by Professor Safarzadeh during the Spring '07 term at USC.
- Spring '07