Growth accounting: The bookkeeping of the supply-side elements that contribute to changes in real GDP - to assess the factors underlying economic growth.

Accounting for Growth leads to two main categories:

• Increases in hours of work
• Increases in labor productivity

Inputs vs. Productivity:

An increasing in productivity means more output per worker, and this has been the main source of economic growth in the U.S economy. Increasing inputs means increasing the amount of resources available to each worker. The increase in capital inputs accounts for only one-third of the increase in real output since 1929, whereas the rise in productivity accounts for two-thirds of this increase in real output

Quantity of Labor:
The amount of labor in America has increased significantly between 1929 and the present because of a huge rise in population, immigration, the integration of women into the labor force, and a greater amount of people working in general and older retirement ages. When there are more laborers, there are lower wages and costs of production, which means a firm can produce more at a lower cost and generates more revenues.

Technological advance:
Improvements in technology has accounted for 26 percent of the increase in real output since 1929. Technological advance includes not only innovative production techniques but new managerial methods and new forms of business organization that improve the process of production. Newer technology is often incorporated in new capital goods, which in turn raises productivity. As Paul Romer stated, "Human history teaches us that economic growth springs from better recipes, not just from more cooking."

• Contributes about 40% to productivity growth

Quantity of capital:
A key determinant of labor productivity is the amount of capital goods avilable per worker. However if both the aggregate stock of capital goods and the size of the labor force increases, productivity won't necessarily rise as the individual worker may not be better equiped.

• Contributes about 30% to productivity growth

In a Macroeconomy, capital is not limited to machinery but also infrastructure

Education and training:
Education and training contribute to a worker's human capital, which in turn helps make the worker more productive and allows them to contribute more to the GDP. However, the number of graduates do not necessarily account for education training: quality is more desirable. Each worker should be placed in a job that allows him or her to do what she or he does best. For example, an engineer would not be productive working in a fastfood joint.

• Contributes about 15% to productivity growth

Economies of scale:
Economies of scale is a reduction in per-unit costs as the size of the market or firm increases. Economies of scale allows firms to use more expensive, but more productive machinery. This allows firms to lower per-unit costs because of increased productivity and efficiency

• Contributes about 15% to productivity growth
• Ex: A large manufacturer of autos can use elaborate assembly lines with computerization and robotics, while smaller producers must settle for less advanced technologies using more labor inputs.

Improved Resource Allocation

• Workers over time have moved from low-productivity employment to high-productivity employment.