total factor productivity (TFP), often called “Solow’s residual” after the most prominent inventor of growth theory and growth accounting, Robert M. Solow. This measure is the best proxy available for the underlying effect of innovation and technological change on economic growth. And the results are surprising. Because the contributions of education and capital deepening were roughly the same in each of the three intervals, all the faster growth of labor productivity in the middle period is the result of more rapid innovation and technological change.
