Start with a Neoclassical Production fn: Y=F(K,L)=AK^α L^(1-α)
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Get it written →Start with a Neoclassical Production fn: Y=F(K,L)=AK^α L^(1-α)
In growth rate terms: 〖%g〗_Y=〖%g〗_A+α〖 %g〗_K+(1-α) 〖 %g〗_L
Where g_Y=(y_(t+1)-y_t)/y_t , g_K=(K_(t+1)-K_t)/K_t , g_Y=(L_(t+1)-L_t)/L_t
§Use PWT to collect data for: Capital stock, Real GDP ,Labor , TFP from 1970 to 2019.
§Take parameters from US Data: α=0.3
§Check Kaldor Growth fact: Is K/Y is relatively constant over time?
§Find average growth rate of Y, K, L and A for each decade: 1970 -79, 1980 -89 and so on
§Find relative contributions to growth for capital (α〖 %g〗_K)/〖%g〗_Y , labor ((1-α)〖 %g〗_L)/〖%g〗_Y and TFP 〖 %g〗_A/〖%g〗_Y .
§Plot relative contributions.
Do the exercise for:
1 Developed/OECD economy
1 Less Developed economy
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