A Dual-Solovian Measure of Productivity Increase and its Early Antecedents
AbstractThe 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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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 15541.
Date of creation: 03 Jun 2009
Date of revision:
productivity increase; TFP; cost function; real wages; income distribution;
Find related papers by JEL classification:
- D33 - Microeconomics - - Distribution - - - Factor Income Distribution
- B16 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Quantitative and Mathematical
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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