Question

Suppose labor's share of output is 70% and capital's share of output is 30%. The country finds that its output grew at a rate of 3.4% during the past year, its labor force grew by 2%, and its capital grew by 3%. In this case, labor contributed percent to the growth of output, capital contributed percent to the growth of output, and the implied rate of growth in technology was percent.

Answer 1

a. Labor contribution 1.4%

b. Capital contribution 0.9%

c. Rate Growth 1.1%

Step-by-step explanation:

SR(t) = Δy/Δt/Y - (αΔk/Δt/k(t) + (1-α)(ΔL/Δt/L(t))

Here, α = 30%

So, labor's contribution = (1-0.3)*2 = 1.4%

Capitals contribution = 0.3*3 = 0.9%

Implied rate of growth in technology is given by SR,

SR = (3.4) - (1.4+0.9)

=3.4-2.3

=1.1%