Graph the U.S. capital-labor ratio since 1960 (use private fixed assets from the Fixed Assets section of the BEA website, www.bea.gov, Table 6.2 as the measure of capital, and civilian employment as the measure of labor). Do you see evidence of convergence to a steady state during the postwar period? Now graph real output per worker and real consumption per worker for the same period. According to the Solow model, what are the two basic explanations for the upward trends in these two variables? Can output per worker and consumption per worker continue to grow even if the capital-labor ratio stops rising?

Table 6.2

Transcribed Image Text:

The Steps of Growth Accounting: A Numerical Example Step 1. Obtain measures of output growth, capital growth, and labor growth over the period to be studied. Example: output growth 40%; AK capital growth = 20%; K AN labor growth