Suppose that in Country 1 the growth rates of multi-factor productivity (a), capital (k), labor (h), and population (n) are 3, 3.4, 1, and 1 percent per year, respectively, and that capital’s share of output (b) equals 0.25. The growth rates of capital (k), labor (h), and population (n) are 3.8, 1, and 2 percent per year, respectively, in Country 2, while capital’s share of output (b) is the same as in Country 1.
(a) Calculate the growth rates of labor productivity, output, and output per capita in Country 1.
(b) If Country 2 is to have the same growth rate of output per capita as Country 1, calculate Country 2’s growth rates of multifactor productivity, labor productivity, and output. (Hint: What must the growth of output be in Country 2 for it to have the same rate of growth in output per capita as Country 1?)