Solow Residual
Definition
The portion of economic output growth that cannot be explained by measurable increases in labour and capital inputs, named after economist Robert Solow. The Solow residual is often interpreted as a measure of technological progress and is closely related to total factor productivity, capturing the output gains attributable to intangible factors such as innovation, education, and institutional quality.
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Growth accounting is a framework that decomposes economic or business output growth into contributions from labour, capital, and productivity (TFP).
Read full answer →The Solow Residual is the portion of output growth that cannot be explained by growth in labour and capital inputs — it represents Total Factor Productivity growth, which is largely driven by intangible assets.
Read full answer →What is Total Factor Productivity (TFP)?
TFP measures the portion of output growth that cannot be explained by increases in labour or capital inputs — it captures the efficiency gains from innovation, technology, and better management.
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