Growth accounting

Splitting output growth into contributions from capital, labour and total factor productivity, weighting each input by its share of income. What the inputs do not explain is credited to productivity.

Where you will meet it

Growth accounting appears in 2 learning outcomes on the CFA syllabus. A few of them:

• Show how growth accounting can be used to forecast potential GDP
  CFA Level II · Economics

  “Growth accounting splits output growth into its sources.”

• Explain how an assessment of trend economic growth feeds into long-run forecasts for asset returns
  CFA Level III · Asset Allocation

  “Potential GDP growth equals labour force growth plus labour productivity growth, or in growth accounting terms %ΔY = %ΔA + α × %ΔK + (1 − α) × %ΔL.”

See also

Total factor productivity

Practise it

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All terms beginning with G · Glossary