Using the growth accounting equation, if the growth rate of output is 5%, the growth of labor is 2% and the growth of capital is 2% then if Î±=0.50 then growth of technology can be estimated to be:

Question

Quizplus · Accepted Answer

The growth accounting equation is: Growth of Output = (α * Growth of Capital) + ((1-α) * Growth of Labor) + Growth of Technology. Plugging in the values: 5% = (0.50 * 2%) + (0.50 * 2%) + Growth of Technology. Solving for Growth of Technology gives 3%.

Using the Growth Accounting Equation, If the Growth Rate of Output