Labor Productivity and Economic Growth

Components of the Aggregate Production Function

Economists construct different production functions depending on the focus of their studies. Figure presents two examples of aggregate production functions. In the first production function in Figure (a), the output is GDP. The inputs in this example are workforce, human capital, physical capital, and technology. We discuss these inputs further in the module, Components of Economic Growth.

The first illustration shows that workforce, human capital, physical capital, and technology produce GDP. The second illustration shows that human capital per person, physical capital per person, and technology per person produce GDP per capital.
Aggregate Production Functions An aggregate production function shows what goes into producing the output for an overall economy. (a) This aggregate production function has GDP as its output. (b) This aggregate production function has GDP per capita as its output. Because we calculate it on a per-person basis, we already figure the labor input into the other factors and we do not need to list it separately.