Theory of Economic Growth

Capital deepening occurs when the supply of capital grows more rapidly than the labor force. IN the absence of technological change, capital deepening will produce a growth of output per worker, of the marginal product of labor, and of wages; it also will lead to diminishing returns on capital and a consequent decline in the real interest rate.

Growth accouting

Growth in out can be decomposed into three separate sources, growth in labor, growth in capital and technological progress.


References

Paul Samuelson and William D. Nordhaus, Economics, 13th Edition, McGraw-Hill, 1989

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