ECN 101 Lecture Notes - Lecture 27: Workforce Productivity, Employment-To-Population Ratio, Physical Capital
Document Summary
Economic growth only emerged in a serious way in the 19th century and increased into the 20th century. As you can see, the lras has shifted forward. When we are studying economic growth, our concern is not whether y is y" or y* (ie: not concerned with output gaps). Instead, we want to know how y* has grown throughout the years (economic growth). Having said this, government policies which affect the lt growth rate even by a small amount will have a major economic impact. Thus, increase in labour productivity or increase in how many people (as a fraction of the total population) are working will increase gdp per capita. This will depend on the labour force participation rate, and the unemployment rate. Ie: if lfpr increases, then gdp per capita rises. (note: n/pop is not just participation rate it looks at the number of people working as a share of the population)
