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The equation below (in Cobb–Douglas form) is often used to represent total output (Y) as a function of total-factor productivity (A), capital input (K), labour input (L), and the two inputs' respective shares of output (α and β are the share of contribution for K and L respectively). As usual for equations of this form, an increase in ...
Y = total production (the real value of all goods produced in a year or 365.25 days) L = labour input (person-hours worked in a year or 365.25 days) K = capital input (a measure of all machinery, equipment, and buildings; the value of capital input divided by the price of capital) [clarification needed] A = total factor productivity
The Solow residual measures total factor productivity, but the productivity variable is normally attached to the labor variable in the Solow-Swan model to make technological growth labor-augmenting. This type of productivity growth is required mathematically to keep the shares of national income accruing to the factors of production constant ...
The exogenous rate of TFP (total factor productivity) growth in the Solow–Swan model is the residual after accounting for capital accumulation. The Mankiw, Romer, and Weil model provide a lower estimate of the TFP (residual) than the basic Solow–Swan model because the addition of human capital to the model enables capital accumulation to ...
where is the so-called total factor productivity. The Leontief production function applies to situations in which inputs must be used in fixed proportions; starting from those proportions, if usage of one input is increased without another being increased, the output will not change. This production function is given by
This equation shows a Cobb–Douglas function where Y represents the total production in an economy. A represents total factor productivity , K is capital, L is labor, and the parameter a {\displaystyle a} measures the output elasticity of capital.
Growth accounting decomposes the growth rate of an economy's total output into that which is due to increases in the contributing amount of the factors used—usually the increase in the amount of capital and labor—and that which cannot be accounted for by observable changes in factor utilization. The unexplained part of growth in GDP is then ...
In macroeconomics, factor shares are the share of production given to the factors of production, usually capital and labor. This concept uses the methods and fits into the framework of neoclassical economics .