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A Dual-Solovian Measure of Productivity Increase and its Early Antecedents

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  • Opocher, Arrigo

Abstract

The duality between a production function and the cost function generated by it implies that a Solovian ‘growth accounting’ measure of productivity increase, as referred to the industry, has an equivalent dual measure, based on what may be called ‘price accounting’. It is argued in this paper that the dual measure provides a coherent framework for considering productivity increase in relation to inflation/deflation, earnings dispersion, long-run variations in domestic relative prices and in external terms of trade. Even though the theoretical interest in measures based on real input prices dates back to the late 1960s, few or no attempts have been made thereafter to adopt it in practice. Curiously enough, the practical adoption of some kind of ‘price accounting’ dates to much earlier. We argue in this paper that, during the 19th century, distinguished statisticians and economic commentators such as G.R. Porter and R. Giffen based their evaluations on the comparative change in prices, wages and profits and in so doing they followed a logic that remarkably resembles that of a dual-Solovian measure.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15541.

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Date of creation: 03 Jun 2009
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Handle: RePEc:pra:mprapa:15541

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Keywords: productivity increase; TFP; cost function; real wages; income distribution;

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  1. Arrigo Opocher, 2010. "The future of the working classes: a comparison between J.S. Mill and A. Marshall," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 17(2), pages 229-253.
  2. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555 Elsevier.
  3. Lydall, Harold, 1969. "On Measuring Technical Progress," Australian Economic Papers, Wiley Blackwell, vol. 8(12), pages 1-12, June.
  4. Dale W. Jorgenson, 1991. "Productivity and Economic Growth," NBER Chapters, in: Fifty Years of Economic Measurement: The Jubilee of the Conference on Research in Income and Wealth, pages 19-118 National Bureau of Economic Research, Inc.
  5. Kevin J. Stiroh & Dale W. Jorgenson, 2000. "U.S. Economic Growth at the Industry Level," American Economic Review, American Economic Association, vol. 90(2), pages 161-167, May.
  6. Hulten, Charles R, 1978. "Growth Accounting with Intermediate Inputs," Review of Economic Studies, Wiley Blackwell, vol. 45(3), pages 511-18, October.
  7. Daniele Checchi & Cecilia García-Peñalosa, 2008. "Labour market institutions and income inequality," Economic Policy, CEPR & CES & MSH, vol. 23, pages 601-649, October.
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Cited by:
  1. Opocher, Arrigo, 2009. "Measuring productivity increase by long-run prices: The early analyses of G.R. Porter and R. Giffen," MPRA Paper 18272, University Library of Munich, Germany.
  2. Bisello, Martina & Opocher, Arrigo, 2013. "Real cost reduction and productivity increase in an individual industry: a price-accounting approach in theory and practice," MPRA Paper 48367, University Library of Munich, Germany.

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