4. Measuring Productivity & Growth Accounting Flashcards
Define Productivity
The effectiveness with which factors of production are converted into output. Also called total factor productivity (TFP) and multi factor productivity (MFP)
Does differences in factors of production account for differences in output between countries?
No. While output between countries does differ due to factors of production, there is a very significant difference in productivity between countries. South Korea has 64% of the US’s productivity, India 31%, Malawi 8.7% (2009/10)
How is producitivity considered in the Solow-Swan Model?
The model is first extended to consider human capital h.
As output = productivity x factors of production,
A = productivity.
*How can we use the solow-swan model to account for differences in output between countries
*That equation with basically Y1 / Y2 expanded to consider ratio that:
ratio of ouput = ratio of productivity x ratio of factor inputs
*What equation fives us the ratio of Productivity between countries under the Cobb-Douglas Production Function
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*State the equation that shows how the growth in various elements of the Cobb-Douglas Production Function affect the growth in output.
*State the equation that shows how the growth in various elements of the Cobb-Douglas Production Function affect the growth in per worker output.
Y = A + (c-1)h+ck
*Draw graphs showing per worker capital and output of two countries, two of which where c1 is more productive then c2, and one where that may or may not be the case
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What is Aggregate Labor Producitivity
per worker output y
Give some limitations and issues of growth accounting
- Total Factor Producitivity is more a catch all variable for inadequacies in the production model then a measure of productivity
- Measurement issues - poor countries tend to overstate capital as investment funds are routed away into corruption, a very severe problem.
