a) Write the production function in its simplest form (human capital being included in TFP) and explain the nature of each factor of production. (10p) 

b) Write the logarithmic form of this production function, Log Y being the average GDP growth in the period considered and compute Log A (contribution of TFP to GDP growth) assuming that in a given period according to national account statistics the average GDP growth (Log Y) and labour growth (Log L) have been respectively 5% and 2% while the capital stock growth (Log K) has been estimated at 6% and alpha at 0.4(10p) 

c) Explain the theoretical value of the parameter Alpha in other words what does the value of Alpha represent? (10p)

Answer rating: 100% (QA)

1 The production function can be written as YFK L where Y represents the output of the firm K represents the quantity of capital L represents the quantity of labour and FK L is a function that relates ... View the full answer