FIN 34220 Lecture Notes - Lecture 6: Production Function, Capital Accumulation, Marginal Product
Document Summary
Capital accumulation and technological progress in the us would appear to be generating a situation in which people are getting more productive, raising labor demand and therefore wages. Real gdp can in principle grow either because we"ve got more people employed or because we"re giving more access of capital to people or because technology is somehow improving. Wages would be a good way of measuring prosperity but keep in mind that wages show productivity as well. So prosperity should not be assessed solely by the gdp numbers. What we want to know is what causes gdp to grow. Alpha = number that tells us when l goes up by exactly how much y goes up. Change in output you"ll get if you change the labor input holding everything else constant. Theory: the wages are ultimately set at the level of the marginal product of labor at whatever the employment level is.
