The Solow Residual as a Black Box

Attempts at Integrating Business Cycle and Growth Theories

Bibliographic Data

ID4297883
AuthorsTiago Mata (0000-0002-6423-299X), Francisco Louçã (0000-0001-9661-6157)
Year2009
Volume41
IssueSuppl_1
Pages334-355
Publication date2009-12-01
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueHistory of Political Economy (JOURNAL)
Journal identifiersISSN: 0018-2702 • E-ISSN: 1527-1919
PublisherDuke University Press (PUBLISHER • US)
DOI10.1215/00182702-2009-031
OpenAlexW2149686110
LanguageEN
Citations received3
References cited81

Robert Solow's "Technical Change and the Aggregate Production Function" (1957) has had an enduring influence on macroeconomics. In this article, we examine the history of fluctuations in growth theory through the story of the "Solow residual" as a "black box." We show that after Solow's seminal contribution, the "residual" became a reproducible object. Losing its ties with the intentions and beliefs of its originator, it was given new and unexpected uses in other branches of macroeconomics. While the residual had always remained a problematic result in growth accounting, its borrowing by real business cycle theorists sought to establish it as a definitive representation of technology. As the claims of the New Classicals came under scrutiny, so did the status and meaning of the object residual. The integration of growth and cycle has since been shaped by the opening of this "black box." Edward Prescott has remained committed to his earlier interpretation of the "Solow residual" as stochastic technology. Others have sought to bracket multiple supply shocks as the residual, abandoning attempts to decompose it. To the New Keynesians the "residual" has been more evidence of market power and the need to integrate rigidities in the study of the cycle

Business cycle · Econometrics · Economics · Growth accounting · Keynesian economics · Macroeconomics · Neoclassical economics · Object (grammar · Political science · Positive economics · Productivity · Residual · Scrutiny · Solow residual · Total factor productivity · Computer Science · Economic Growth and Productivity · Economic Theory and Institutions · Economic Theory and Policy · Law · Mathematics