DEFINITION: The growth accounting approach is based on the micro-economic theory of production and directly related to the calculation of multi-factor productivity (MFP) growth. MFP growth is measured by deducting from output growth the growth of labour and capital inputs. Turned around, the same relation can be used to explain output growth by the rates of change of labour and capital inputs and by MFP growth.In these calculations, the growth rate of labour and capital inputs is weighted with their share in total costs. Thus, the contribution of labour to GDP growth is measured as the speed with which labour input grows, multiplied by the relative importance of labour captured by its share in total costs. The growth contributions of capital or of certain types of capital are measured in a similar way so that the growth contribution always reflects two effects, the growth rate of the input and its relative importance in production.
|Group of 7 countries (G7) average (profile)||1.02%||2009|