The rate of growth of labor productivity (Y/L) may be expressed as the rate of growth of total factor productivity:
A) plus the capital share multiplied by the rate of growth of the capital-labor ratio.
B) minus the capital share multiplied by the rate of growth of the capital-labor ratio.
C) plus the rate of growth of capital productivity.
D) minus the rate of growth of capital productivity.

Question

Quizplus · Accepted Answer

The rate of growth of labor productivity (Y/L) can indeed be expressed as the rate of growth of total factor productivity plus the capital share multiplied by the rate of growth of the capital-labor ratio. This is because labor productivity growth can be driven by improvements in total factor productivity (which includes technological advancements and improvements in efficiency) as well as by changes in the capital-labor ratio, reflecting the amount of capital available per worker. The capital share in this context refers to the proportion of total output that is attributed to capital inputs, and its multiplication by the growth of the capital-labor ratio captures the contribution of increased capital intensity to labor productivity growth.

The Rate of Growth of Labor Productivity (Y/L) May Be