Question

I need step by step solution to the following this question asap .I have limited time so please do it quickly with detailed explanation

thanks in advance/H

1. “Output per capita differences across countries are mainly due to differences in total factor productivity.” Do you agree?

Answer 1

Yes, I would agree. To begin we must know what Total factor productivity(TFP) means, it basically means measuring economic efficiency. TFP is also responsible for differences in output per capita(Example GDP) across countries. This differences is mainly among under developed countries(UDC) and developed countries(DC). The main reason behind this mismatch is due to differences in skill sets among labors of UDC & DC. UDC mainly buy technologies from DC for their growth purpose but these technologies are designed as per skill sets of DC economies. So, ultimately workers of UDC do not have the required skills to take optimal use of such imported technologies. Eventually the productivity is lower as the operating labor does not possess the required skill set to operate these technologies.