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MENTAL MODEL · M3224

Solow Residual

Solow Residual
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Version 1.0.0 · Updated 2026-07-30

CORE DEFINITION

A concept proposed by Robert Solow, referring to the part of economic growth that cannot be explained by increases in capital and labor inputs, also known as Total Factor Productivity (TFP). It measures the contribution of factors such as technological progress, efficiency improvements, and institutional changes to economic growth.

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Quantification of technological progress. It provides an analytical framework for understanding the sources of economic growth, decomposing growth into factor input growth and productivity growth, and has important guiding significance for development economics and growth policy formulation.

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Derived from the production function Y = A·K^α·L^(1−α): residual = total output growth − (α·capital growth + (1−α)·labor growth). It equals the remainder that cannot be explained by factor inputs, i.e., TFP, decomposing growth into "how much is invested" and "how efficiently it is invested."

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Source support: Explicit

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    en.wikipedia.orghttps://en.wikipedia.org/wiki/Solow_residualZH · Explicit
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