We consider a developed economy in the years of 2018-2019 and the years of 2020-2021 (the years of COVID-19 pandemic). During the first period according to national account statistics GDP average growth rate is computed as 2% and employment average growth rate as 0.5%. The capital stock growth has been estimated as 2%. In the second period those average growth rates are for GDP -2%, for employment -1% and for capital stock -3%. a) Calculate the contributions of TFP to GDP growth in both periods. Alpha = 0.4 b) How can you explain the capital stock and employment negative growth rates in the second period? Also explain and comment the difference of TFP contributions to GDP growth in the first and second periods
We consider a developed economy in the years of 2018-2019 and the years of 2020-2021 (the years of COVID-19 pandemic). During the first period according to national account statistics GDP average growth rate is computed as 2% and employment average growth rate as 0.5%. The capital stock growth has been estimated as 2%. In the second period those average growth rates are for GDP -2%, for employment -1% and for capital stock -3%.
a) Calculate the contributions of TFP to GDP growth in both periods. Alpha = 0.4
b) How can you explain the capital stock and employment negative growth rates in the second period? Also explain and comment the difference of TFP contributions to GDP growth in the first and second periods
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