Growth Accounting

Growth accounting is a formula based on the Solow model theory to explain economic growth, which like the gross domestic product (GDP ) is measured. The growth determinants are here:

• : Technology coefficient
• : Capital Stock
• : Labor force

A GDP growth is thus explained by the growth of the technology coefficients from the growth of the available capital stock and from the growth of the available workforce. I.d.R. one assumes as a macroeconomic production function is a production function of the Cobb -Douglas type:

In the chosen production function growth is therefore determined by factor accumulation ( labor and capital) and efficiency ( technological progress ). The question is, what percentage have these factors on the real growth process. The procedure is the following:

The factors of production function used are all changeable in time, it is thus:

Denote by the first derivative of. Thus arises

Dividing both sides by, one obtains

On the left is now the growth rate of GDP, which is determined by the capital growth, population growth and the so-called Solow residual.

• Growth theory