Suppose that total capital and labour both increase by the Suppose that total capital and labour both increase by the same percentage amount so that the amount of capital per worker k does not change. Writing the production function in per-worker terms, y = f(k), requires that this increase in capital and labour must not change the amount of output produced per worker y. Use the growth accounting equation to show that equal percentage increases in capital and labour will leave output per worker unaffected only if aK + aN = 1.
Suppose that total capital and labour both increase by the Suppose that total capital and labour both increase by the same percentage amount so that the amount of capital per worker k does not change. Writing the production function in per-worker terms, y = f(k), requires that this increase in capital and labour must not change the amount of output produced per worker y. Use the growth accounting equation to show that equal percentage increases in capital and labour will leave output per worker unaffected only if aK + aN = 1.
Chapter16: Economic Growth
Section: Chapter Questions
Problem 5E
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Suppose that total capital and labour both increase by the
Suppose that total capital and labour both increase by the same percentage amount so that the amount of capital per worker k does not change. Writing the production function in per-worker terms, y = f(k), requires that this increase in capital and labour must not change the amount of output produced per worker y. Use the growth accounting equation to show that equal percentage increases in capital and labour will leave output per worker unaffected only if aK + aN = 1.
Suppose that total capital and labour both increase by the
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