Components of the production function
- The functional form can be presented as a Cobb-Douglas one:
- The Land Market is represented in the sense of capital.
- Work and other forms of capital, like machines, are represented in their proper sense of labor and capital, respectively.
- TFP acts as a productivity multiplier for other variables.
- Human capital depends on the increase of the Working-Age Population (WAP), which is encompassed by labor, leading to Equation 5.
Equation 5 - Functional form
$$ Y = A K^{\alpha} L^{\beta} $$
Legend:
- $Y$: Total production
- $A$: TFP
- $K$: Capital
- $L$: labor
- $\alpha, \beta$: coefficients