Chapter7_GrowthAccounting_021709

# Chapter7_GrowthAccounting_021709 - Growth Accounting Juan...

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Growth Accounting Duke University and Federal Reserve Bank of Atlanta February 17, 2009 Growth Accounting February 17, 2009 1 / 17

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Growth Accounting Output is produced by inputs capital K and labor L , in combination with the available technology A . Want: decompose the growth rate of output into the growth rate of capital input, the growth rate of labor input and technological progress. This exercise is called growth accounting. Robert Solow (1957). First step in the analysis of fundamental determinants of economic growth. Growth Accounting February 17, 2009 2 / 17
Aggregate Production Function Maps inputs into output: Y = F ( A , K , L ) A is called total factor productivity (TFP). Cobb-Douglas example: Y = AK α L 1 α CES example: Y = α K ε + ( 1 α ) ( AL ) ε ± 1 ε Growth Accounting February 17, 2009 3 / 17

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Observations in discrete time. Production Function: Y = F ( A , K , L ) . Di/erentiating with respect to time and dividing by Y ˙ Y = F A ˙ A + F K ˙ K + F L ˙ L Dividing by Y , A , and L , we get ˙ Y Y = F A A Y ˙ A A + F K K Y ˙ K K + F L L Y ˙ L L Then: g Y = g A + F K K Y g K + F L L Y g L g A = F
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## This note was uploaded on 05/13/2010 for the course ECON 110D taught by Professor Schmitt-grohe during the Spring '08 term at Duke.

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Chapter7_GrowthAccounting_021709 - Growth Accounting Juan...

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