4-19-2010

4-19-2010 - explained by the factors of production o a =...

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4/19/10 Solving for Growth via Production Factors Human Capital, investment in human i.e. Students in college receiving education Production Function: y = A*f(K,L) o A: residual, parameter that includes extraneous factors that affect growth (technology, education, infrastructure), things that cannot be attributed to purely K or L o K: capital o L: labor Y = AK α L 1- α G y = a + (w k g k ) + (w L g L ) o W k,l = ratio of α , 1- α o G k,l : growth of capital and labor i.e. o W L =W K =1/2 o G k =.08, G y =.06, G L =.04 o 0.06 = a + .5(.08) + .5(.04), a = 0. Which means growth rate of output is fully
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Unformatted text preview: explained by the factors of production o a = factors of productivity • i.e. o w k-.25, w L =.75 o g k =.08, g L =.04, g y =.08 o .08 = a + .25(.08) + (.75)(.04) o .08 = a + .05 0.08 = .03 + .02 + .03 o a = .03, divide by overall growth .08 o .08/.08 = .03/.08 + .02/.08 + .03/.08, we do this in order to account for 100% of growth o .03/.08 = .375, thus 37.5% of growth is unaccounted for • Economic inequality is measured in terms of disparity within income o Consider: growth of income within population...
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4-19-2010 - explained by the factors of production o a =...

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