Tuesday, December 09, 2008
The Solow Residual is found by taking output, Y, divided by Kapital ^.36*Labor^.64. I calculated growth rates in income, capital, labor, and total factor productivity. My data finds that Kapital contributes the most to output and technological progress contributes the least. I was surprised to find that technology contributed the least as I thought technology was powering growth and not capital accumulation. Of course, one can always attack the metric, but I think the exogenous changes in energy might have caused the slow growth. As I have been saying, technology is slow to diffuse as people use new technology in old ways. As Robert Solow said, "Technology shows up every where but in the statistics." to view the data, click on the picture to enlarge it.