(Long-Term Productivity Growth) Suppose that two nations
start out in 2018 with identical levels of output per work
hour-say, $100 per hour. In the first nation, labor produc-
tivity grows by 1 percent per year. In the second, it grows
by 2 percent per year. Use a calculator or a spreadsheet
to determine how much output per hour each nation will
be producing 20 years later, assuming that labor produc-
tivity growth rates do not change. Then, determine how
much each will be producing per hour 100 years later.
What do your results tell you about the effects of small
differences in productivity growth rates?