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intro RSM part 3

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Rotman Commerce
Michael Szlachta

RSM Part 3 Macro Issues for the Future Productivity What is it? Why matter? Aggregate output created by production function with inputs of LABOUR (L), CAPITAL (K), LAND-ENERGY-RESOURCES, TECHNOLIGICAL CHANGE Changes in inputs (L K L-E-R) dont account for all growth tech change calculated as residual Productivity - How much output a country gets from its inputs Technology or productivity growth More outputs for same inputs adds to standard of living Labour Productivity: Measures output per worker or per hour Affects real wage Can be affected by capital or other inputs, in addition to technology Total Factor Productivity (TFP): growth not accounted for by other inputs... Most useful measure, but most difficult to determine Productivity matters for profits nationally and in firm (US productivity growth 90s stock market boom) Future productivity growth key Q in long term economic outlook Just few tenths of a percent can add billions to GDP, Government Revenue for use on social programs and corporate profits Where Does It Come From? Labour Productivity: Capital stock is key contributor, impact can vary widely Possible contributors to TFP growth known (but size unclear): Research & Development Higher & Lower Edu RSM Part 3 Page 1
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