Question: An expansion of production function is to separate workers based on thein quality as below. Y = z(K+ 15000Lu)0.6 LO4, where Y is output,

An expansion of production function is to separate workers based on thein

An expansion of production function is to separate workers based on thein quality as below. Y = z(K+ 15000Lu)0.6 LO4, where Y is output, z is TFP, K capital, Lu unskilled labor and Ls skilled labor. The expression for the marginal product of skilled and unskilled labor are given below: MPL = 0.6 z(K+15000Lu)-0.4L04. 15000 MPL, = 0.4 z(K + 15000L). -0.6 %3D In this production function capital and skilled labor complement each other, while capital and unskilled labor are substitutes. The picture you can have is that a trained operator using a bulldozer replacing a group of brawny man with shovels. (a) In year 1990, z = 500, K = 30000, L, = 1, Lu = 1. Calculate the marginal product %3D of each labor type. (b) In year 2010, z = of each labor type. 700, K = 65000, Ls = 1, Lu = 1. Calculate the marginal product %3D (c) Calculate the accumulated percentage increase of marginal product for each type of labor during this 20 year period.

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