2011 - Econ21.20.2010 productivity...

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Econ 2 1.20.2010 productivity productivity is output per hour o output/hour employment cost index How much it cost firms to hire workers Fell a lot during the recession and hasn’t changed much Pretty low and fairly cheap to hire workers They have to pay workers wages and salary and benefits Economic growth Large cross country differences in incomes Also, in growth rates What causes economic growth? And, what may deter growth? Labor productivity  is the key To understand its role, define o Y: output (real gdp) o Pop: population o N: employment Real per capita gdp is:
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o y/pop multiply and divide by n: o y=pop=y/n (productivity) * n/pop (employment share) since the share of population employed is bounded above the main mechanism for growth is labor productivity *female labor participation has gone up and male has gone down *recession employment to population ratio has fallen a lot production function *diminishing returns to labor o k: amount of physical capital o l: amount of labor o y: real output (gdp) o a: the state of technology o f: function mapping inputs into outputs y=af(l,k)  o constant returns to scale xy=af(xl, xk)
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2011 - Econ21.20.2010 productivity...

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