In the curriculum it says that "both the function F() and the scale factor A reflect technology. An innovation that makes it possible to produce the same output with the same amount of capital but fewer workers would be reflected in a change in the function F() because the relative productivity of labor and capital has been altered. In contrast, an increase in TFP does not affect the relative productivity of the inputs. As is standard in the analysis of economic growth, unless stated otherwise, the level of “technology” should be interpreted as referring to TFP"
Doesn’t the function F() reflect technology and labor.Not just technology? I don’t understand when they say it reflects technology only.
In regards to the items in bold in the first paragraph, what does it mean when it says that the TFP does not affect the relative productivity of the inputs? Isn’t TFP the level of producivity of the technology? Why does it say to refer to is as the “level of technology”?
They don’t say that it reflects technology _ only _; they say that it reflects technology. And labor, and capital. It reflects technology to the extent that the relative productivity of labor and capital are changed.
They mean that if technology increases the productivity of labor 1%, it also increases the productivity of capital 1%. Thus, the ratio of productivity of labor to productivity of capital is constant.
Technology has no productivity. Labor has productivity, and capital has productivity. Technology simply changes the productivity of labor or capital (or both), it doesn’t produce anything itself.