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Accounting for Growth in the Age of the Internet The Importance of Output-Saving Technical Change

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  • Charles R. Hulten
  • Leonard I. Nakamura

Abstract

We extend the conventional Solow growth accounting model to allow innovation to affect consumer welfare directly. Our model is based on Lancaster?s New Approach to Consumer Theory, in which there is a separate ?consumption technology? that transforms the produced goods, measured at production cost, into utility. This technology can shift over time, allowing consumers to make more efficient use of each dollar of income. This is ?output-saving? technical change, in contrast to the Solow TFP ?resource-saving? technical change. One implication of our model is that living standards can rise at a greater rate than real GDP growth.

Suggested Citation

  • Charles R. Hulten & Leonard I. Nakamura, 2017. "Accounting for Growth in the Age of the Internet The Importance of Output-Saving Technical Change," Working Papers 17-24, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:17-24
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    References listed on IDEAS

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    Cited by:

    1. Charles R. Hulten & Leonard I. Nakamura, 2019. "Expanded GDP for Welfare Measurement in the 21st Century," NBER Working Papers 26578, National Bureau of Economic Research, Inc.
    2. Leonard Nakamura & Jon Samuels & Rachel Soloveichik, 2017. "Measuring the “Free” Digital Economy within the GDP and Productivity Accounts," Economic Statistics Centre of Excellence (ESCoE) Discussion Papers ESCoE DP-2017-03, Economic Statistics Centre of Excellence (ESCoE).
    3. David Baqaee & Emmanuel Farhi, 2018. "The Microeconomic Foundations of Aggregate Production Functions," NBER Working Papers 25293, National Bureau of Economic Research, Inc.
    4. Diane Coyle & Leonard I. Nakamura, 2019. "Toward a Framework for Time Use, Welfare, and Household Centric Economic Measurement," Working Papers 19-11, Federal Reserve Bank of Philadelphia.
    5. Benjamin Bridgman, 2018. "Is Productivity on Vacation? The Impact of the Digital Economy on the Value of Leisure," BEA Working Papers 0148, Bureau of Economic Analysis.
    6. Bart Los & Marcel P. Timmer, 2020. "Measuring Bilateral Exports of Value Added: A Unified Framework," NBER Chapters, in: The Challenges of Globalization in the Measurement of National Accounts, National Bureau of Economic Research, Inc.
    7. Muendler, Marc-Andreas, 2017. "Trade, technology, and prosperity: An account of evidence from a labor-market perspective," WTO Staff Working Papers ERSD-2017-15, World Trade Organization (WTO), Economic Research and Statistics Division.
    8. Charles Hulten & Leonard I. Nakamura, 2020. "Expanded GDP for Welfare Measurement in the Twenty-First Century," NBER Chapters, in: Measuring and Accounting for Innovation in the Twenty-First Century, National Bureau of Economic Research, Inc.

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    More about this item

    Keywords

    consumers; accounting; consumer welfare; GDP;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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