Reference no: EM131484866

Question: How does shifting labor from a low-productivity sector to a higher-productivity sector affect an economy's GDP? This exercise will show you how and why that happens. Utilizing the data you calculated from part c of question 2 above, determine the net impact on total GDP for your country from transferring out 10 percent of the labor force in your country's surplus labor sector and adding that to the workforce in the sector with the highest per worker productivity (e.g., if your surplus labor sector is agriculture, reduce the agricultural labor force by 10 percent, say from 45 percent to 35 percent; then add that 10 percent of workers to the high productivity sector, increasing the labor force by 10 percent in that sector; for example, in industry, increase the labor force from 17 percent to 27 percent).

You should be able to determine the net gain to GDP from such a movement of workers as: the loss in output from a decrease in 10 percent of the workforce in the surplus sector plus the increase in output resulting from an increase in the labor force by 10 percent in the high productivity sector. The result you get should be a specific, concrete numerical percentage change in GDP resulting from a negative change in output in the low-productivity sector and a positive change in output in the high-productivity sector as a result of the shifting of labor.