Consider the following production function Y = A×K^a×L^1?a.
If a = 0.4, and over the past year output grew 4 percent, total factor productivity (TFP) grew 2.6 percent, and capital grew 2 percent, what was the growth rate of labor?

Question

Quizplus · Accepted Answer

Using the growth accounting equation: Growth rate of Y = Growth rate of A + a*(Growth rate of K) + (1-a)*(Growth rate of L). Plugging in the values: 4% = 2.6% + 0.4*2% + 0.6*(Growth rate of L). Solving for the growth rate of L gives 1%.

Consider the Following Production Function Y = A×Ka×L1?a

Consider the Following Production Function Y = A×K^a×L^1?a