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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

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.

Suggested Citation

  • Charles R. Hulten & Paul Schreyer, 2010. "GDP, Technical Change, and the Measurement of Net Income: the Weitzman Model Revisited," NBER Working Papers 16010, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16010
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    Cited by:

    1. Susanto Basu & Luigi Pascali & Fabio Schiantarelli & Luis Serven, 2012. "Productivity and the Welfare of Nations," Working Papers 621, Barcelona Graduate School of Economics.
    2. Taehyoung Cho & Junghoon Kim & Paul Schreyer, 2015. "Measuring the evolution of Korea’s material living standards 1980–2012," Journal of Productivity Analysis, Springer, vol. 44(2), pages 157-173, October.
    3. Benjamin Bridgman, 2014. "Is Labor's Loss Capital's Gain? Gross versus Net Labor Shares," BEA Working Papers 0114, Bureau of Economic Analysis.
    4. Constantin Anghelache & Cristina SACALÃ, 2016. "The analysis of correlation between the GDP and the Gross Income," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(9), pages 88-93, September.
    5. Constantin Anghelache & Cristina SACALÃ, 2016. "Multiple linear regression used to analyse the corelation between GDP and some variables," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 64(9), pages 94-99, September.
    6. Susanto Basu & Luigi Pascali & Fabio Schiantarelli & Luis Serven, 2012. "Productivity and the Welfare of Nations," Working Papers 621, Barcelona Graduate School of Economics.

    More about this item

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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