ECON 2000 Lecture Notes - Lecture 8: Luddite, Industrial Policy, Joseph Schumpeter

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Ch 8 -economic growth ii: technology, empirics, and policy. Recap: capital, labor & technology are key determinants of a nation"s production of goods & services. We now write the production function as: Where l e = the number of effective workers: increases in labor efficiency have the same effect on output as increases in the labor force. The new production function states that total output depends on the # of units of capital k and on the effective # of workers, l x e. Assume: technological progress is labor-augmenting; it increases labor efficiency at the exogenous rate, g, (the rate of labor-augmenting technological progress) g. Technological progress causes the effective # of workers to increase. New notation: y = y / le = output per effective worker, k = k / le = capital per effective worker. Production function per effective worker: y = f(k) Note: increases in the # of effective workers b/c of technological progress tends to k.

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