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Productivity Versus Welfare; Or GDP Versus Weitzman's NDP

  • Nicholas Oulton

While GDP is the appropriate measure of output, I argue that Weitzman's NDP (WNDP)-nominal net domestic product deflated by the price of consumption-is the appropriate measure of welfare. Total factor productivity (TFP) growth measures the shift in the GDP frontier, and there is an analogous concept for WNDP, which I call total factor welfare (TFW) growth. I calculate and compare WNDP and GDP, and TFP and TFW, for the United States in the 1990s. I find that the acceleration of WNDP post 1995 was as great as that of GDP, even though the aggregate depreciation rate was rising. Copyright 2004 Blackwell Publishing Ltd.

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Article provided by International Association for Research in Income and Wealth in its journal Review of Income and Wealth.

Volume (Year): 50 (2004)
Issue (Month): 3 (09)
Pages: 329-355

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Handle: RePEc:bla:revinw:v:50:y:2004:i:3:p:329-355
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