Growth accounting is a procedure used in economics to measure the contribution of different factors to economic growth and to indirectly compute the rate of technological progress, measured as a residual, in an economy. This methodology was introduced by Robert Solow in 1957
Growth accounting decomposes the growth rate of economy's total output into that which is due to increases in the amount of factors used - usually the increase in the amount of capital and labor - and that which cannot be accounted for by observable changes in factor utilization. The unexplained part of growth in GDP is then taken to represent increases in productivity (getting more output with the same amounts of inputs) or a measure of broadly defined technological progress.
The technique has been applied to virtually every economy in the world and a common finding is that observed levels of economic growth cannot be explained simply by changes in the stock of capital in the economy or population and labor force growth rates. Hence, technological progress plays a key role in the economic growth of nations, or the lack of it.
Read more about Growth Accounting: Example, Technical Derivation
Famous quotes containing the words growth and/or accounting:
“Humour is the describing the ludicrous as it is in itself; wit is the exposing it, by comparing or contrasting it with something else. Humour is, as it were, the growth of nature and accident; wit is the product of art and fancy.”
—William Hazlitt (1778–1830)
“At the crash of economic collapse of which the rumblings can already be heard, the sleeping soldiers of the proletariat will awake as at the fanfare of the Last Judgment and the corpses of the victims of the struggle will arise and demand an accounting from those who are loaded down with curses.”
—Karl Liebknecht (1871–1919)