What is growth accounting? Explain how measurement error in growth accounting impacts upon our estimate of the contribution of total factor productivity to growth in output

Growth accounting is an economic tool that shows us the amount of changes in real gross domestic products in an economy are due to change in labour, available capital, human capital and technology.

Growth accounting methodology helps computing total factor productivity as a residual from the difference between growth in outputs and growth in inputs. Measurement error in growth accounting creates confusion in the entire calculation. Wrong estimation of total factor productivity to growth create obstacle to the maximization of inputs. So it is very important to minimize the measurement errors in growth accounting.