Question

If a country’s labor and capital grow at the same rate, is this likely to have the same impact
on the growth rate of output? Why or why not?

Answer 1

According to the growth accounting equation, growth rate of output depends upon the growth rate of labour and growth rate of capital as well as on the share of labour and capital in output. Besides there is a third factor called the growth rate of total factor productivity. This indicates that if the growth rate of capital and labour is same it does not result in increasing the output at the same rate because that total factor productivity growth rate might be different.