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Solow residual

Updated: Aug 20, 2021

The part of the growth of national income which cannot be explained by the growth of labour and capital. The Solow residual is calculated by assuming that labour and capital are rewarded in an amount equal to their marginal revenue products. The residual that remains after subtracting payments to factors from the value of output is ascribed to ‘technical progress. See also growth accounting.

Reference: Oxford Press Dictonary of Economics, 5th edt.

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