GrowthAccountingNotes

GrowthAccountingNotes - Growth Accounting Framework The...

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Growth Accounting Framework The growth accounting framework used in this course is based on the aggregate production function taking the Cobb-Douglas form: 1 , tt t t YA K L α = where t Y is output, t A is total factor productivity (TFP), t K is capital input, t L is labor input, and 1 is labor’s share of income. In order to obtain a decomposition for output per working-age person, we rewrite the above equation as follows: 1 1 1 . t t t YK L A NY N ⎛⎞⎛⎞ = ⎜⎟⎜⎟ ⎝⎠⎝⎠ Written in this form, output per working-age person, t t Y N , decomposes into a productivity factor, 1 1 t A ; a capital factor, 1 t t K Y ⎛⎞ ⎜⎟ ⎝⎠ ; and a labor factor, t t L N . The decomposition requires collecting data for the series of output, capital stock, working-age population, and hours worked. A value for labor’s share of income must also be chosen. Once collected, these series and labor’s share of income allow for the calculation of the TFP series: 1 . t t Y A KL = Data Sources t Y , real GDP: Common sources for real GDP include the Detailed Tables of Main Aggregates in the Organisation for Economic Co-operation and Development’s (OECD) Annual National Accounts available at www.sourceoecd.com, the International Monetary
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GrowthAccountingNotes - Growth Accounting Framework The...

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