Growth accounting The appendix to this chapter shows how data on output, capital, and labor can be used to construct estimates of the rate of growth of technological progress. We modify that approach in this problem to examine the growth of capital per worker. Y = K1>3 1AN22>3 The function gives a good description of production in rich countries. Following the same steps as in the appendix, you can show that 12>32gA = gY - 12>32gN - 11>32gK = 1gY - gN2 - 11>321gK - gN2 where gY denotes the growth rate of Y, gK is the growth rate of capital, and gN is the growth rate of the labor input.

a. What does the quantity gY - gN represent? What does the quantity gK - gN represent?

b. Your download of the Penn World Tables in Chapter 10 includes the information needed to calculate the components of the growth accounting formula in the appendix. That formula is residual K gY - 3agN + 11 - a2gK4 From the Penn World Tables, you can fill in the chart below: Use rgdpo for output (2011 US dollars); emp for number of employees labor input; ck for the capital stock (2011 US dollars) The share of labor is labsh. These values are copied directly from the Penn World Tables version