Question 2: GDP growth = growth in potential labor force + labor force participlation + labor productivity.
Why not include growth in total factor productivity? Isn’t that relevant?
I don´t remember exactly, but I think in the case is stated that the analysis only refers to the labor components, isn´t it?
It says labor-based approach, but asks for GDP growth. Does that count?
There are two main components for aggregate trend growth:
(i) Growth from labour inputs, comprising;
- Growth in potential labour force
- Growth in labor partcipation
(ii) Growth from labor productivity, comprising;
- Growth from capital inputs
- TFP growth
Now, as you can see “Growth from Labor productivity” already include TFP, so no need to double count it.
because labor productivity already comprises tfp growth and capital input growth
so if you added tfp growth to “labor productivity”, you would be double counting tfp growth
hope this helps!
Got it! Thanks all!
Agree…This was a “RTFQ” moment for me, then quite obvious!