Reference no: EM133302438

Consider a neoclassical production technology for real GDP given by Yt= AtK1/3t(HtLt)2/3, where Atis TFP, Kt is capital, Ltis labor,and Ht is the human capital of the labor force (representing factors like health and education). If the economy is growing at 10% a year, capital is growing at 9% a year, the labor force is growing at 3% a year, and human capital grows at 1% a year, what must the long-run growth rate of TFP, A, be? Would the inferred contribution of TFP be higher or lower if we failed to account for the contribution of human capital, Ht, in our growth accounting exercise?