Global Economy 13: The Rise of the US

Question 1

Explain the success of the US

Answer 1

• Consider the potential sources of growth (going back to the standard growth model)
• Cobb-Douglas production function:
  Y = AK^alphaL^1-alpha -> => Y/L = A(K/L)^alpha -> per worker
  Y/N = (Y/L)(L/N) => Y/N = A(K/L)^alpha(L/N) -> per capita (aka per person)…
• Was American affluence due to TFP growth, capital deepening or labour force participation? → Did the sources differ over time?
• N=population, K =capital, L=labour, Y =output…