Appendix – Growth accounting
GDP per capita can be decomposed in the following way:
So GDP per capita can be considered as the product of the number of hours worked per capita (labour utilisation) and the value of the goods and services produced per hour worked (labour productivity).
Labour utilisation can be further decomposed as follows:
So labour utilisation is a function of the average hours worked by workers, the participation rate, the unemployment rate, and the proportion of the population who are of working age.
All else remaining equal, an increase in the participation rate will therefore increase labour utilisation, which will in turn increase GDP per capita.
