The growth in potential GDP can be expressed by the following production function, called the Cobb-Douglas production function:
∆Y/Y = ∆A/A + α×(∆K/K) + (1−α)×(∆L/L)
where:
Y = output
A = technology
K = capital
L = labor
α = elasticity of output with respect to capital = share of income paid to capital
(1 − α) = elasticity of output with respect to labor = share of income paid to labor
We can state this function in words as:
growth rate in potential GDP = long-term growth rate of technology + α (long-term growth rate of capital) + (1 − α) (long-term growth rate of labor)