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GDP, Technical Change, and the Measurement of Net Income: the Weitzman Model Revisited

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  • Charles R. Hulten
  • Paul Schreyer
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    Abstract

    We show how technical change, measured as a shift in the GDP function, is combined with net income to track welfare change. This provides a bridge between the productivity literature and the welfare-related literature that tends to reason in terms of net product functions: although the relevant income measure is net of depreciation, productivity is measured based on gross output. We show that net product, net income, net expenditure and productivity change are complements, not substitutes. We also examine whether holding gains and losses should be part of depreciation and conclude that in a general equilibrium setting, either productivity change or holding gains should be part of an extended Weitzman-type net income measure, but not both.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16010.

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    Date of creation: May 2010
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    Handle: RePEc:nbr:nberwo:16010

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    Cited by:
    1. Basu, Susanto & Pascali, Luigi & Schiantarelli, Fabio & Serven, Luis, 2013. "Productivity and the Welfare of Nations," CAGE Online Working Paper Series 163, Competitive Advantage in the Global Economy (CAGE).

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